In CUNA's rebuttal to the 24-page report, Mike Schenk, CUNA's senior economist, charged the Boston consultant engaged in “broad-brush” conclusions, producing a document “which generates more heat than light” on the industry's current status.

The Celent study claimed that previously CUs “simply required a branch or two, a core banking system and an ATM,” but in the past 10 years “Internet banking, bill pay, know your customers and office of foreign assets control compliance” have altered the environment.

“What is driving this change?” asked the report's co-author, Bart Narter, Celent senior vice president. “Competition driven by demand for mobile banking, consumer and business remote- deposit capture.”

The study found that smaller CUs “don't have the scale to create these offerings and even the larger credit unions dwarfed by the size of their bank competitors are finding it difficult to keep up.”

In a positive note, the study, based on NCUA data from 2010, said that while CUs under $50 million are in a fast decline, the industry appears to be adjusting to the phenomenon.

In reporting on the CU decline, the study noted that the number of CUs in the U.S. has dropped “rapidly from 10,316 at the end of 2,000 to 7,330 at the end of 2010” and this represents a decrease of 29% “or a compound annual growth rate of minus 3%.”

While the vast majority of the consolidation is under the $50 million asset mark, CUs over $500 million, on the other hand, “are vastly outgrowing any other category relative to their tier,” said the Celent authors.

The report said the past 10 years have seen CUs of more than $500 million in assets rapidly gaining deposit share and growing in number.

Smaller CUs, however, find it difficult to keep up “with the ever-increasingly intricate product sets and channel offerings necessary in order to stay with the curve,” adding that “all but the largest credit unions lack the infrastructure to run these systems in-house or have the buying power to drive service bureau pricing down,” said Celent.

In an executive summary, the Celent writers found that CUs under $2 million dropped by 1,509 over the last decade representing “50% of the decrease in total credit union count.”

The report concluded that it is evident that “running a modern credit union requires a greater scale than in the past, owed in large part to increased regulatory measures, channel support, product proliferation and branch-ATM coverage.”

“Clearly, credit unions with less than $50 million in assets are struggling to survive, with those under $10 million fading the fastest,” said the report.

Disputing many of the conclusions in a series of charts, Schenk, who also is vice president of economics and statistics for CUNA at its Madison office, noted that many small CUs retain substantial capital positions and hold “high asset quality, grow and earn at above average rates and are effective niche players.”

Certainly, admitted Schenk, small CUs feel the pressure to provide a wide variety of services and be all things to all people, creating “significant strains.”

But having remote branches and the like is not is the biggest challenge, he maintained. The biggest burdens lie in compliance, corporate stabilization costs, back-office redundancies and succession planning.

Countering what he said are the various myths on operating costs, he said that over the past decade CUs under $50 million reported annual average operating expense ratios equal to 3.92%.