By 2025, experts estimate there will be only 4,500 creditunions.

CEOs at the nation's 40 state leagues are working to repositiontheir organizations for this future credit union landscape. Assmall credit unions continue to merge into larger ones, many of thesurviving cooperatives are expected to expand not only in theirhome states but across state lines and will need leagues to supporttheir operational and political needs.

Despite the decades-long merger trend in which 16,617 creditunions were lost from 1970 to 2012, league mergers didn't take holduntil recent years. From 2007 to 2013, 16 state leagues merged. Tenof the credit unions formed two-state leagues and six merged tocreate three-state leagues.

Though mergers eroded member credit union revenues, leagues arefinancially sound because of investments they made in for-profitsubsidiaries, according to tax documents filed with the IRS.

League executives point to net assets as a key indicator offinancial condition. Net assets include the net income of aleague's cash funds, savings, accounts receivable, investments, andthe equity value of for-profit subsidiaries. What also hasreinforced the financial stability of leagues is that they hold fewliabilities such as mortgages and other debts, IRS 990 formsshow.

Collectively, the nation's leagues posted nearly $250 million innet assets as of 2011. Many leagues generated year-over-year netasset increases from 2008 to 2011, while others have maintainedsteady. A handful of leagues have seen strong asset spikes, while afew have had slight declines in net assets but are stillfinancially sound.

For-profit subsidiaries have allowed leagues to become far lessdependent on declining credit union membership dues, programrevenues and other fees from years of consolidation.

In fact, some credit union leagues such as Iowa and Michigan run operating deficits to keep membership dues lowbecause their for-profit companies are generating strong profits tosubsidize the shortfalls.

For example, the Michigan Credit Union League, which posted morethan $55 million in net assets in 2011, made more than a dozen duesreductions and rebates worth millions since 2001, when there were454 credit unions in the state. In 2001, the league collected $3.2million in membership dues. In 2012, when there were 306 Michigancredit unions, the league received just $635,000 in dues, or about$2,000 on average for each credit union.

“We could run our operation without dues, but we decided not togo that route because we realized on the business side there arevulnerabilities if we were to lose major sources of revenue,” saidDave Adams, president/CEO of MCUL. “We prefer to do the 50%rebate on dues every year based on the performance of theorganization.”

Executives contend their organizations can remain viable bycontinuing to produce innovative products and services while alsomarketing them in related or new industries for new revenueopportunities.

However, continuing consolidation will put pressure on someleagues to merge, predicted Dan Egan, president/CEO of the Massachusetts Credit UnionLeague.

“You are rapidly getting down close to 5,000 credit unions inthe country. It becomes virtually impossible to sustain thestand-alone state trade association model with those numbers,” Egansaid. “All of the league consolidations are now gaining theefficiencies of a centralized staff that can be delivered tomultiple states. That has really been the answer to the issues ofdeclining numbers of credit unions.”

Egan negotiated the industry's first management agreement withthe New Hampshire Credit Union League in 1985 when it was serving53 credit unions. The Rhode Island Credit Union League was serving55 credit unions in 1992 when it also signed a management agreementwith MCUL.

Egan believes the growing trend of large credit unions openingbranches in other states or merging with credit unions in otherstates will lead to more league consolidations.

“We are seeing larger memberships, partially through mergers andpartially through field of membership changes that allow creditunions to grow regionally or nationally,” Egan said. “So creditunions will want services in multiple states to meet theiroperational and political needs in those states. I think the tradeassociations are going to have to cover larger geographical areasto be sustainable over the long term.”

Patrick LaPine, president/CEO of the League of SoutheasternCredit Unions, agrees.

LSECU merged the Alabama and Florida leagues in 2010, and savedmore than $1 million in operating costs as a result.

Demographic information has become so sophisticated it enablescredit unions to quickly target growth markets in other states sothey can open new branches or merge with other credit unions,LaPine said.

Currently, there are about 700 credit unions that operatebranches in other states, and that number is expected to increaseover the next few years, according to the American Association ofCredit Union Leagues.

“My marching orders from my board are that when we look tocontinue to expand and grow regionally, we should not be hinderedby geographical limitations; meaning, just don't look at contiguousstates,” LaPine said.

Ultimately, he said, LSECU's decision to merge with otherleagues, regardless of their location, comes down to the best fitwhen it comes to size, strength and for-profit subsidiaries growthopportunities.

The Cornerstone Credit Union League, which finalized theconsolidation of the Arkansas, Oklahoma and Texas leagues in July,is not currently looking for new merger partners. However, theCornerstone name was purposely selected because it's not locationspecific, said CCUL President/CEO Dick Ensweiler.

He explained CCUL didn't want to get branded as a southernleague, but instead one that could serve credit unionsanywhere.

“It was important to us not to have a specific geographiclocation reflected in the name,” Ensweiler said. “We could getbigger. For many (leagues) our model may be an appealingalternative, but we are not now in the market trying to merge withother leagues.”

Likewise, the Mountain West Credit Union Association is notcurrently looking to merge with other states, but MWCUAPresident/CEO Scott Earl said his board would consider it.

Susan Newton, executive director of the AACUL, said she isn'tcertain credit unions expanding into other states will force moreleagues to merge. However, she did predict more inter-leaguecollaboration initiatives to help control costs and deliverproducts and services to credit unions.

“I do think the (trend) of credit unions growing in multiplestates does create an opportunity for leagues to look at how (they)can engage credit unions that are not based in their state, howthey can engage them in advocacy and how they can provide them withproducts and services,” Newton said.

Among the 21 state leagues that merged through consolidations ormanagement agreements, 14 had fewer than 100 credit unionmembers.

Next Page: Cornerstone a Product ofDemand

The Cornerstone league merger, for example, included two smallleagues. The Credit Union Association of Oklahoma was serving 70credit unions and the Arkansas Credit Union League was serving 62when decided to merge with the Texas Credit Union League, which bycomparison had 518 members.

Credit union leaders in Arkansas and Oklahoma said mounting financial pressures of rising costs and the demandsfor more products and services drove their decision to approve themerger.

At the end of last year, 14 independent leagues were servingfewer than 100 credit unions in their states.

Ken Watts, president/CEO of the West Virginia Credit Union League, said he discussed mergerswith his board earlier this year. There were 97 credit unions inWest Virginia at the end of 2012. Since 2000, the state has lost 35credit unions.

“We discussed all of this and what's the (breaking) point ofsustainability and viability,” Watts said. “Our board feels westill have the mass to be able to function, but it still is a veryreal concern and one that we have to deal with.”

The Idaho Credit Union League and the Montana Credit Union League are in similar positions.

At the end of 2012, there were 56 Montana credit unions; since2000, the state has lost 20 credit unions. In Idaho, there were 51credit unions in 2012, and the state has lost 22 credit unionssince 2000.

“My board as recently as nine months ago sort of ratified theidea that they want to stay as their own league,” said TracieKenyon, president/CEO of MCUL.

Chris Johnson, ICUL's president/CEO, said he would not beserving the league if he thought it might become a mergercandidate.

“Independence in policymaking and management is a key tenet ofthe governing philosophy of our league board and our servicecorporation board,” Johnson said. “Personal engagement with ourelected representatives and regulators on a credit union-by-creditunion basis is of paramount importance to us, and that is somethingthat is best accomplished by an independent league.”

All three league CEOs said they plan to remain independent bycollaborating with other leagues for cost savings and revenueopportunities.

Maine Credit Union League President/CEO John Murphy said aleague's number of credit union members doesn't really matter. Hisleague serves 61 credit unions. Since 2000, Maine has lost 21credit unions.

“At one time, every state league had a hell of a lot more creditunions than they have today, so it comes down to the desire ofcredit unions in each state as to what they want to fund out oftheir dues structure,” he said. “It really all comes down tothat.”

For example, MCUL increased dues in 2009 with the approval ofits member credit unions to support a state-wide awareness campaignthat the league has managed since the 1970s. Murphy said creditunions continue to support the awareness campaign because it hashelped them attract new members and grow.

Some of the larger leagues that serve more than 100 creditunions also are confident they can remain autonomous even thoughthey expect the number of credit unions to fall under the 100 markover the next few years.

The Iowa Credit Union League, for example, served 121 cooperativesin 2012, but expects that number to fall below 100 in the next fiveyears. Since 2000, the state has lost 72 credit unions.

Patrick Jury, ICUL's president/CEO, said the board decided yearsago not to fund the league completely through membership dues andhas no plans to increase dues. Instead, ICUL expects to rely on thecapital generated from its group of for-profit subsidiaries tosupport the league's operations.

As Iowa credit unions grow through mergers, Murray Williams,ICUL's chief operating officer, said the league will be focusing onhow to serve them.

ICUL plans to remain independent and, as of 2012, it has builtup more than $30 million in net assets that can help it stay thatway.

“Our model has never been one of trying to find a way toconsolidate with trade associations around the Midwest. Our modelhas been more of how can we engage with the leagues in terms of theproducts and services they offer their members to create more valuefor their organizations and create value for our organization,”Jury said.

For example, Jury said ICUL provides regulatory compliancesupport for the Nebraska, Kentucky and New Mexico leagues. And, hesaid his league has additional deals with other leagues.