The NCUA approved 41 mergers in Q1 2015, the lowest number of first-quarter consolidations in three years.

Though the federal agency doesn’t see any changes to current industry consolidation trends, some consultants believe competitive pressures to provide expensive, technology-based products and services members demand, coupled with higher regulatory and compliance costs, will drive more larger midsize credit unions to merge.

Last year, the NCUA green-lighted 53 mergers in Q1, 71 consolidations in Q1 2013 and 62 mergers at the end of Q1 2012.

John Worth, an economist for the NCUA, said the number of completed mergers totaled 63 in the first quarter of 2015. That number includes consolidations that were approved by the federal agency in previous months.

The NCUA determines completed mergers when a credit union, which had its consolidation approved earlier, does not file a 5300 Call Report at the end of the first quarter of the year.

“We focus on the number of completed mergers because sometimes the approved mergers never occur,” Worth said.

He noted the Q1 number of approved mergers seems to be a little lower, but not for any fundamental economic reason.

Worth also doubted that the improving economy has had any dramatic impact on changing the current merger trends, noting that the 63 completed mergers in Q1 of this year are in line with the average number of completed consolidations that the NCUA has seen in previous years.

On average, about 263 mergers are completed every year, according to the NCUA. Additionally, 94% of the merged credit unions continue to be those that are under $50 million in assets.

However, some consultants believe that future mergers will include cooperatives with larger assets that serve metropolitan regions.

“If you are a $100 million or $200 million credit union in a metropolitan area, you are a small credit union, and it is really difficult to compete,” Glenn Christensen, president/CEO of the CEO Advisory Group, a M&A consultancy in Kent, Wash., said. “I think more credit unions are understanding that just to compete against the banks and nontraditional banks, they need to achieve critical mass. I think critical mass is really going to be the driver of mergers in the future.”

What’s more, Christensen thinks the industry will see more consolidations among the credit unions in the $500 million to $1 billion asset range.

“I’ve had a lot of discussions with credit unions with $500 million and a billion dollars in assets that are talking about mergers and looking at the benefits,” he said. “I think it is only a matter of time before we see more consolidations of the billion-plus credit unions in an attempt to truly make a difference in metropolitan markets.”

Sabeh F. Samaha, president/CEO of Samaha & Associates in Chino Hills, Calif., who consults with cooperatives on mergers, also expects larger credit unions to start consolidating, but that it will not increase the pace of the industry’s current merger trends.

Read more: Michigan has been a popular state for mergers in 2015 …

“We are seeing more survivalistic, capitalistic behaviors [from credit unions] but nowhere near the banks,” he said. “In my opinion, there will be more mergers sneaking up to higher levels, bigger sizes, but nothing that is going to change the current velocity of mergers significantly.”

During Q1 of this year, there were three larger credit union mergers that took place in Michigan.

The $206 million Tri-Pointe Community Credit Union in Grand Blanc, Mich., merged with the $1.6 billion Genisys Credit Union in Auburn Hills and the $104 million Nupath Community Credit Union in Wyandotte consolidated with the $532 million Community Choice Credit Union in Farmington Hills. In addition, the $93 million Good Shepherd Credit Union in Lincoln Park merged into the $850 million Credit Union ONE in Ferndale.

“For a number of years, we have seen a growing number of like-size credit union mergers in Michigan,” Dave Adams, president/CEO of the Michigan Credit Union League & Affiliates, said. “We continue to see this trend as open fields of membership, intense competition, new technology, regulatory burden and a growing number of CEO retirements fuel merger trends.”

Adams also has observed that for larger, like-size mergers, they happen most often when one of the credit union CEOs is retiring or when one of the credit unions is facing serious financial or competitive challenges.

In the first three months of 2015, Michigan posted a total of six mergers, which was the highest number of consolidations in the nation. Illinois was second with five mergers and Virginia was third with three consolidations. Iowa, Kansas and Nebraska each had two mergers.

However, Michigan’s consolidation trends mirror national merger activity, Adams noted.

In the 10-year period ending Dec. 31, 2014, Michigan experienced a drop from 413 credit unions to 274, a 33.6% reduction, or roughly 3.4% per year. Nationally, for the same time period, credit union numbers fell from 9,346 to 6,398, likewise a 31.5% rate, or 3.2% per year, virtually the same rate.

“It is true that during the past two years, the pace has increased both nationally and in Michigan, again, with very similar numbers,” Adams said. “Nationally, for the two years ending Dec. 31, 2014, the consolidation rate was 9.5% while in Michigan, that rate was only slightly higher at 10.5%.”

Nonetheless, Adams is not concerned about the rate of consolidation as it is happening in virtually every sector of financial services as well as numerous other industries.