Total assets of federally insured credit unions are rising — not despite an ongoing trend of consolidation, but because of it, according to data from the National Credit Union Administration.
NCUA call report data for the second quarter revealed a 12.6% increase year over year in total loans outstanding to $1.56 trillion as growth in auto lending, home equity loans and credit card balances continued from the
Another consistent trend is the falling number of federally insured credit unions. There were 5,573 of them in operation as of the fourth quarter of 2017, but that pool has shrunk by nearly 16% to 4,686 as of June 30.
Regulators are working to curb the decrease by
Despite fewer and fewer credit unions each year, assets have continued to rise across the board for credit unions of all sizes, supported by mergers and other trends, according to credit union advisors.
"When I started in the industry back in 1986, there were roughly 16,000 charters, and now there's less than 5,000 credit union charters. … It's just the natural progression that over time any industry consolidates," and we're seeing that support industrywide growth, said Mark Treichel, a former executive director of the NCUA who now runs the Green Cove Springs, Florida-based advisory firm Credit Union Exam Solutions.
Treichel referenced the recent NCUA data to highlight how the smallest 25% of all credit unions in 2017 averaged less than $8.8 million of assets, but that grouping has since risen to $14 million as of this past quarter. Those in the top 10% in size jumped from roughly $479 million of assets to just under $900 million for the same period of time.
"You look at less of them today than you did six years ago, because there's less of them in existence, but those remaining have grown either by their members putting more money in or by a merger," Treichel said.
Not all executives are eager to pursue such deals, as many at the helm of institutions between $100 million and $500 million of assets are
The driving forces behind the consolidation are only growing with time, as
The growing number of closures speaks volumes about the "race to get to scale" against the high "costs of technology and everything else today" plaguing boutique credit unions, said Tim Scholten, founder of the Westerville, Ohio-based consultancy group Visible Progress.
Scholten explained that those under a certain asset threshold, which he valued at $100 million of assets, have difficulty adopting modern offerings such as
This divide can eventually become too unwieldy to cross, driving many to a
"The cost to offer services as a baseline of what consumers expect, and for free, before they even open your doors has gotten substantially more expensive [for smaller institutions]," Scholten said. "So scale is really, really important and it's got to happen quickly."
While overall asset distribution is a significant metric for industry growth, regulators are digging deeper to better understand the market factors behind the figures.
"The gap between banks and credit unions, which is a part of this growth and important from my perspective, is a function of attractive interest rates both on loan products and deposit products, and attractive services in general," said Andrew Leventis, chief economist for the NCUA.
