CUNA Mutual Group's June credit union trends report noted that credit unions are poised to grow membership by 900,000 members per year over the next few years. The estimated member count is now 91 million. Even though the 1.6 million year-to-date gain is 500,000 above full-year 2007 results, initial 2007 mid-year results were revised lower by more than 800,000 when final results were in, pointed out Dave Colby, chief economist at CUNA Mutual.
Colby said while annualized membership gains of 3.3 million, which is three times 2007's numbers, would be ideal, current estimates may be revised lower when the mid-year 5300 Call Report results are completed.
"Basically, we have not seen actions [such as] superior interest rates [or] expanded marketing by credit unions and/or the system which would produce these exceptionally strong gains," Colby said.
Meanwhile, the next 12 months may be "the most challenging environment current credit union leadership has ever faced," Colby predicted. Credit quality issues, such as payment risk and collateral valuations will dominate operating results with risks heavily weighted on the downside, he added.
"In this environment, mergers to gain economies of scale and scope will likely be the best option. Mergers involving financially stressed credit unions will only add to the market consolidation."
There are now 8,243 credit unions, according to data from CUNA Economic & Statistics. Colby said this reflects a net decline of 153 credit unions through the first six months of 2008, indicating market contraction roughly 23% above the pace in 2007. The estimated net loss of 41 credit unions in June brought the year-over-year market contraction to 295 institutions. The figure is consistent with CUNA Mutual's forecast of 321 credit unions in 2008, with slightly faster contraction in the second half of the year, he explained.
"Even if we miss our 321 forecast on the low side in 2008, the pressures of the economic cycle and competitive market forces will drive consolidation rates higher in the coming years and this assumes no significant change in the underlying value of a credit union charter--federal or state," Colby said.