Credit Union Mergers getting bigger

Posted: December 7, 2010 in Credit Unions, NCUSIF
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The nation’s largest merger a $4.7 billion combination of Addison Avenue Federal Credit Union of Palo Alto Calif. and First Tech CU of Beaverton, Ore. has won final approval of First Tech members, it was announced Friday.

Credit Unions are merging at a rate of 3% per year over the past 4 years. There is basically 1000 less credit unions in September 2010, then there was at the beginning of 2006.

Are the big getting bigger?

  • 19% of the credit unions have an asset size greater than $100 million.
  • More than half of the credit unions have assets size less than $20 million.

With the current pressure from NCUA to garner more funds to keep the stabilization fund shored up, where does that leave the smaller credit union? Most are struggling to make a profit in today’s environment, only to be siphoned off to pay the fund to help support the corporates who invested in Mortgage backed securities. Where were the regulators?

Where do you see the trend going?

U.S. Credit Unions Asset Groups – Sep. 2010
Sep-10 2009 2008 2007 2006 <$5 Mil. $5-$20 Mil. $20-$100 Mil. >$100 Mil.
7,536 7,708 7,965 8,268 8,535 1,882 2,105 2,147 1,402
25% 28% 28% 19%
  1. Matt Davis says:

    I definitely expect more mergers as credit unions scramble to address bottom line pressures. I worry that the fallout will confuse consumers even more about the difference between credit unions and banks.

    • Matt,
      Good point about confusing the consumers. I believe the Credit Unions could do a better job of marketing themselves. They have had a perfect opportunity to do so with the bashing of the banks the past couple of years. I also agree with you that bottom line pressures will lead to more mergers.

  2. […] • Credit Union Mergers getting bigger […]

  3. Unlike the FDIC, which attacked problem institutions starting with the largest and worked their way down, the NCUA has practiced forbearance. This causes continued pressure on the NCUSIF, which leads to assessments to credit unions to keep the fund at an appropriate level, which leads to more institutions falling into the red, which continues the vicious cycle. Until the NCUA starts resolving problem institutions, this cycle will continue. That will lead to more mergers and larger institutions that can handle the hits to their capital.

    I fear we’re going to end up with only large credit unions and, as Matt said, they will be indistinguishable from banks. There will be no more “common bond”.

    • Clay,
      Your point about forbearance is well taken, and will continue this cycle. Unfortunately because of the corporates, the NCUSIF fund is draining the profits from the credit unions which will lead to more mergers of larger institutions, thereby threatening their “common bond”.