The yearend buzz on credit union mergers presages a bumper year in 2011 but one leading Oregon consultant, Merger Solutions Group, said that the volume in both numbers and size is dramatically down in 2010.
The dropoff underscores what the Forest Grove firm found is a five-year trend of slowing consolidation, said its president J. David Bartoo.
"The total asset volume of credit union mergers is down by 24% from a year ago and the actual numbers by 19%," he said. "Even the average size is down year over year and this is the first time that has occurred in a decade."
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At the same time, distressed and liquidated merger activity has taken off, he said, noting that less than 1% of all mergers were considered "distressed" five years ago, but in 2010 they account for 33.5% of mergers. In 2005, less than 1.55% of the merger volume was considered distressed compared to 35.7% this year.
"In 2005, over 370 mergers were considered 'healthy' but year to date in 2010 that number has dwindled to under 130," said Bartoo, whose firm draws its statistics from NCUA call report compilations and other data.
Meanwhile, despite the lower numbers for this year, Dennis Dollar, former NCUA chairman and a Birmingham consultant, is forecasting a big jump in mergers, tripling the 175-200 expected this year. He cites various factors including the NCUA assessments, the compliance/technology/corporate burdens plus the down economy for triggering the increase, plus the fact that "mergers are now a way of life."
Bartoo said many of his clients "are finding that their 'backyard options' are too limited with
underperforming CUs or that staff consolidations have hampered merger plans." Nonetheless, he said, "they are increasingly looking for the best merger plan terms outside of their area and even their state."
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