FOREST GROVE, Ore. -- The perception may be evident that credit union mergers are on the upswing, but NCUA statistics show a significant decline from a year ago based on several factors, according to David Bartoo, head of a merger consulting firm here.

"For one thing NCUA was approving fewer mergers in the last quarter of 2006 which is producing a decline now," explained Bartoo, president of the Merger Solutions Group, a firm representing CU clients.

In the firm's latest report, Merger Solutions found that in the third quarter of 2007 there were 57 CUs receiving preliminary approval with an average size of over $21 million per merging CU.

"This is a significantly lower number than the 81 mergers approved by the NCUA in Q3 2006," said Bartoo. "As we had predicted in December 2006, there was going to be a significant slowdown in merger activity when compared to previous years." The firm noted that merger approvals by the NCUA through three quarters of 2007 versus 2006 showed an 18% reduction.

The key to the firm's prediction of slowing activity, he said, rests on what he described as the "modeling of individual credit union merger risk in 2006" based on acquisition opportunities.

Using capital ratios and other data, Merger Solutions noted that its "merger propensity model" which is available for its clients seeking to acquire CUs or holding the status quo has shown a reduced number of CUs based on metrics data having "a high merger likelihood in comparison to previous years."

By region, NCUA's Region IV saw the most activity with the approval of 16 mergers totaling over $276 million in assets, said Bartoo. Region V experienced the highest merger volume with just over $654 million in total assets being transferred through 13 mergers

Most of this, he said, was via the Toyota Federal Credit Union ($260 million) merger with Western Credit Union and Golden Bay Credit Union ($210 million) merger with Meriwest Credit Union.

California led the nation with the most completed mergers at nine followed by Pennsylvania with eight and Texas with seven.

For the second time in the last three quarters, state chartered CUs made up a majority (30 out of 57) of CUs in NCUA approved mergers. With 25 mergers in 2007, Region II nearly doubled its total mergers of 13 in 2006, the Merger Solutions report concluded.

--jrubenscut@aol.com

Instant Insights /

Credit Union Merger Activity Declined in 2007

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