FOREST GROVE, Ore. - A company that in late 2007 accurately forecast the level of merger activity among credit unions during the first quarter of this year is predicting only accelerated activity for the remainder of the year.
Merger Solutions Group reported that 61 credit unions were involved in mergers during the first quarter of this year. David Bartoo, president, said the U.S. is now seeing a gradual increase in merger activity when compared to previous years. “With March of 2008 setting a new high in mergers approved since May of 2007, we expect credit union mergers to continue its acceleration of activity into the 2nd quarter and we will see the number of credit unions fall below the 8,000 level by the end of July,” said Bartoo, further noting "The pace of consolidation over the past five years has been 3.29%. We anticipate monthly annualized consolidation to increase to over 4% to 6%, 32 to 50 mergers, in the coming months."
Bartoo noted that economic and performance trends continue to be in sharp decline for credit unions of all asset classes.
“Total net income, not factoring out the large boost from the VISA IPO, was down 18% in Q1 2008 when compared to Q1 2007 and nearly one in every five credit unions posted a net loss,” Bartoo observed. “This trend, along with other declining metrics, are pushing an increasing number of credit unions to consider a merger as a strategic planning option for 2008. Several of our larger clients, $50 million to $500 million, have an strong sense of urgency to get their options in order prior to the Dec. 15th, 2008 change in FASB CU merger accounting to the purchase method."
Among other first quarter merger notes, according Merger Solutions Group:
* Three interstate mergers completed. “Watch for this trend to increase as merging credit unions continue to look outside their market areas for strong partners that can protect employee jobs and continuing credit unions look to utilize this trend to expand into multi-state.”
* 82% of Q1 merger volume went to state-chartered credit unions. “This is also a stronger continuation of federally chartered merging with state-chartered credit unions. The ratio has been over four-to-one in the past three years.”
* The average asset size of the Continuing CU has been $316 million. The average asset size of the Average Merging CU has been $16.4 million ($9.8 million if the Great Wisconsin CU/Summit CU merger is not included).
* The 23 approved mergers in March was the highest monthly total since May 2007.
* Two continuing CUs had a negative ROA.
* 37 of the Continuing Credit Unions had assets under $100 million; 19 were under $50 million in total assets.
* Pennsylvania, Florida and Texas had the highest level of merger activity in Q1. (c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com http://www.sourcemedia.com
