After all of the talk surrounding merger activity given slower growth and tighter margins in credit unions, 2005 turned out to be a year of more of the same as the credit union industry continued to consolidate at about a three percent rate. Although credit unions of all sizes have had merger conversations and/or contemplated the idea, there were 302 approved mergers in 2005 versus 331 in 2004. Total merged assets increased to $3.5 billion from $3.1 billion in 2004, as the average merged credit union had $11.7 million in assets versus $9.3 million in 2004.
Here are the quick stats on the 2005 approved mergers:
- Largest merged credit union: Citadel FCU (before $681M in PA) merged with Atlantic FCU ($290M in PA). Citadel FCU had $1.0 billion in assets as of the third quarter 2005.
- Smallest combined merger: Servco FCU (before $817,796 in PA) merged with GTC FCU ($121,351 in PA). Servco FCU had $765,909 in assets as of the third quarter 2005.
- Merged credit unions over $50M: 16 in 2005 versus 11 in 2004.
- Merged credit unions between $20M – $50M: 21 in 2005 versus 20 in 2004.
- Merged credit unions between $10M – $20M: 23 in 2005 versus 39 in 2004.
- Merged credit unions less than $10M: 241 in 2005 versus 261 in 2004.
- States with the most mergers: Ohio (27), Pennsylvania (19), and New York (19).
- Merged credit unions as a percentage of industry: 3.28 percent in 2005 versus 3.46 percent in 2004.
Where Are Mergers Headed?
Are credit union mergers inevitable or can small credit unions survive and continue to provide excellent member services? Economies of scale are a significant factor pushing smaller credit unions to join larger institutions. Members are demanding a wide range of products and services and want easy access to branches and/or ATMs. While smaller credit unions continue to play a significant role in the industry, several are finding it difficult to compete with minimal marketing budgets, margin pressures and historically low growth. Can state leagues, CUSOs and/or networks replace the need for size by leveraging the capability of multiple credit unions, or are economies of scale the trump card?
As credit union executives contemplate potential mergers, there are synergies that can be measured. Areas of evaluation include financial performance, credit union philosophies, balance sheet compositions and product mixes. The ultimate driver of any merger discussion though is how it can enhance the value that members receive.