Margin contraction and a write-down of a financial planning business have hacked into the bottom line earnings of People's Choice Credit Union.The country's fourth largest mutual banking provider reported a net profit of A$21 million for the 12 months to the end of June - down 34 per cent on the 2018 performance of $32.1 million.The decline in net earnings was mostly driven by a one-off $8.4 million write-down of goodwill in the credit union's financial planning arm.Chief executive Steve Laidlaw said the write-down had become necessary given the recent pricing of advice transactions in the industry."Since the hearings of the royal commission we always anticipated having to write off the financial planning investment," he said."We have brought forward the write-down by a year or two, but financial planning is a business we'd like to stay in."We're committed to the business - we think financial planning is a very good fit for our business."While most of the credit union's financial planners work in Adelaide, the business also has a presence in WA, Victoria and the Northern Territory, with plans to expand in Canberra.People's Choice and most other customer-owned institutions are generating above-system growth in retail deposits and home lending, but profitability of their core banking businesses is being eroded by the declining rate environment.People's Choice increased its residential loan base by 6.2 per cent last year but interest revenue grew by only 2.8 per cent.Laidlaw said the mortgage growth was pleasing but acknowledged that downward pressure on interest margins was likely to persist."Our volume growth hasn't translated into a significant increase in interest revenue," he said."That's the impact of the declining interest rate environment - it's particularly challenging for many organisations."I think margins will continue to track southwards for some time."  As lenders such as ING move to boost fees to counter margin pressure, Laidlaw said People's Choice would not go down the same path."We're certainly not going to increase fees," he said.People's Choice is currently undergoing a multi-faceted digital transformation program that is aiming to reconfigure the distribution and customer service functions of the business.An important part of the program is to overhaul the mortgage servicing platform to help win more lending business through brokers.The credit union currently originates less than ten per cent of its annual mortgage volumes through third party channels."We will be looking at increasing our use of brokers but primarily in new geographic markets," Laidlaw said.In the last two years the credit union has stepped up its push into the Victorian market, where it expanded its loan base by almost 14 per cent last year.Laidlaw said he was concerned that credit unions and mutual banks could wind up as collateral damage of regulatory reforms flowing from the royal commission. He said some of the changes were likely to impose disproportionately higher cost burdens on small institutions and that planned reforms to the risk capital framework could be negative outcomes for mutuals.One of the issues raising concern was APRA's proposal to set identical risk weights for credit