The need for additional economies of scale as the result of thedownturn and credit squeeze, not NCUSIF assessments, may drive moremerger activity this year.

That's according to CUNA Mutual Group's just-released TrendsReport. At the end of February there were 8,021 CUs, as estimatedby CUNA Economics and Statistics. Through the first two months of2009, the net decline in CUs was 67 institutions.

Over the past year, the CU count decreased by 322 institutions,which is in line with CUNA Mutual's early 2009 forecast of 350CUs.

"We do not believe current results are driven by challengesbrought on by NCUSIF assessments, rather the accumulated weight ofour economic [and] credit downturn and the need for additionaleconomies of scale and scope," wrote Dave Colby, chief economist atCUNA Mutual, in the report.

Although the industry lost 361 CUs in the $0-$20 million assetclass in 2008, the remaining 4,576 CUs (57% of all CUs) had acollective capital-to-asset ratio of 15.6%, according to thereport.

"This is why we believe reasons other than capital challengeswill drive mergers of these smaller institutions," Colby wrote.