The Effects of Credit Union Service Organizations on Credit Union Performance

Abstract

This study examines the effects of credit union service organizations (CUSOs) on credit union performance for the period 2009 through 2014. I use random effects models with Mundlak (1978) correction to estimate the relationships between CUSOs and credit union performance variables. Credit union participation in CUSOs increased over the sample period and participation increases with credit union size. CUSO participation is divided based on whether the credit union wholly owned the CUSO or was required to collaborate with other institutions. I find evidence that participation in wholly-owned CUSOs increases the interest rate spread, collaborative consumer mortgage origination reduces loan rates, and insurance brokerage or agency significantly increases non-interest income for credit unions. The results of the study support existing findings that small organizations are reluctant to give up autonomy and offer insight on which CUSOs benefit credit unions and their members.