MADISON, Wis. — Extreme market pressures coupled with a recession will accelerate the rate of credit union mergers going forward, according to Dave Colby, chief economist at CUNA Mutual Group.
Even though CUNA's most recent economics and statistics estimates indicated a year to date net decline of just 198 CUs through October, Colby said he believes the rate of consolidation is higher and "likely accelerating," he wrote in CUNA Mutual Group's latest Credit Union Trends Report. CUNA reported 8,198 CUs at the end of October for a net loss of 245 CUs over the past year.
"The NCUA Insurance Report of Activity shows approved mergers of 68 over the past three months and CUNA reports the loss of just 42 CUs," according to Colby. "While some differences may be explained by timing [such as] approved merger to actually merged, extreme market pressures and a major recession will accelerate the rate of CU consolidation going forward."
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The industry can expect two consecutive years of below trend consolidation, but a much stronger trend of mergers will emerge beginning in 2009 and continue forward well into 2011, Colby said in the report, adding more large CU mergers may be likely in the years ahead. Merger activity is based on the assumption that there is "no significant change in the value of a CU charter," he noted.
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