The Co-Op Drop
The number of federally insured credit unions has fallen below the 9,000 mark for the first time since the advent of the National CU Share Insurance Fund.
"I don't think there's any significance to this as a trigger point, per se," said Jeff Taylor, an economist at NAFCU, of federally insured credit unions dropping to 8,945 as of mid-2005. "But it does indicate that the trend toward consolidation continues. You see it in federal charters, state charters, everywhere. But in general it's a healthy trend."
Taylor suggested the vast majority of consolidation is the result of mergers, not liquidations, and that of those mergers, most of them are "positive mergers" in that they were not mergers forced upon credit unions that had no other choice.
"These are mergers of two healthy credit unions, for good reasons, and they benefit the members of both credit unions," Taylor averred. "Generally, we're only seeing maybe 15 or 20 per year where it's a merger of a troubled institution."
"If you don't have a certain size and you want to be full service, you need to have strategic partners," he continued. "In today's competitive market, you have to be able to offer the best selection of products and services."
But some have suggested that the ever-shrinking number of credit unions has the potential to weaken opportunities in the cooperative movement while lessening the diversification of the NCUSIF.
"The strength of the cooperative movement is not tied to the number of credit unions we have," Taylor insisted. "Unless we start see a situation where all we have are a few mega-credit unions, this is not a problem."
But what about small CUs, which have often been called upon to shine up the proverbial credit union "white hat."
"We still have plenty of small credit unions out there, even with all of the consolidation," Taylor related. "The average size of a credit union is still $65 million, and the median is about $11.4 million. So it would take a lot of consolidation to get to a point where we have no small credit unions. Credit unions won't lose the white hat no matter what their size or how many there are as long as they continue to do what they do best: serve their members."