If consumers continue looking outside of banks for the bestrates on products like money market accounts, credit unions couldgain another 1.7 million new members as they did last year.

According to CUNA Mutual Group's January 2010 “Credit UnionTrends Report,” at the end of November, the latest period tracked,total industry membership was 92.8 million. Membership gains arelikely to be revised lower when final NCUA year-end data isreported, the report read.

“When the final data is in, we think CUs will have grownmembership by more than 1.7 million in 2009 and the 2010environment will be favorable for similar results,” according toCUNA Mutual Chief Economist Dave Colby.

A number of factors helped boost membership nationwide,including consumers seeking the safety of insured and localdepository institutions and rate shopping for deposits and loanrefinancing, the trends report noted. Still, CUs continued to postlower deposit yields. CUNA estimates showed national average sharedraft rates of 0.39%, regular shares of 0.54% and MMAs at0.99%.

When you combine these rates with the fact that 80% of depositgrowth over the past year is attributable to these three accounttypes, the industry can expect an even lower cost of funds than the1.81% reported by the NCUA in third quarter 2009 data, Colbysaid.

“This will help offset the adverse bottom line impact of loweryields on surplus funds,” Colby said.

In spite of historically low deposit yields and an equity marketgain in excess of 26% for the S&P 500, CUs have seen theirsavings portfolios increase 10.4% over the past year, the trendsreport data revealed. Colby said to help put current results inperspective, the year-to-date savings increase of $69 billion isalmost double the average full-year gain over the past decade.Total assets at CUs reached $903 billion in November, 8.7% aboveprior year levels. Savings per member rose 8.1% over the past yearto $8,254. This average increased $617 despite membership.

“Members concerned about their financial and employment futureswill continue to add to their balances until we see several monthsof improving economic and employment results,” Colby said.

At the end of November, CUNA estimates showed 7,853 CUs, whichreflected a net loss of 30 CUs during the month, 235 YTD and 274over the past 12 months. Colby said industry data pointed to ahistorical trend in industry consolidation and how current resultsare well below long-term trends. Given the harsh economic andcredit market realities throughout 2009, last year's consolidationactivity was focused on financially challenged CUs, he pointedout.

Why is there below-trend consolidation? Colby said discussionswith CU leaders indicate their attention was focused on assistingmembers through these challenging times and managing their ownsafety and soundness through the economic, write-off and assessmentchallenges. While many noted good opportunities for strategicmergers, the time and dollar resources to successfully completemergers were committed elsewhere.

Meanwhile, CUNA Mutual is forecasting a net reduction of justover 270 CUs in 2009 with industry consolidation moving above 300institutions in 2010 and 2011.Colby said small CUs, who aretraditional merger candidates, appear to be more than adequatelycapitalized. The weighted average capital-to-asset ratio of the4,243 CUs, which is 54% of all CUs, with assets of $20 million orless, is safely above 15%, he added.

“Most of these CUs are in no hurry to merge,” Colby said.

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