The market for credit union mergers remains in the doldrums with few signs it will perk up soon, a leading merger consultant said Monday.
“After seven straight years of slowing consolidation numbers, we are definitely seeing a bottoming of the credit union merger market,” observed David Bartoo, head of Oregon-based Merger Solutions Group.
The trend, Bartoo said, underscores the reluctance of larger CUs to take on added balance sheet, equity or underwriting woes which may be tied to bad debts of the CUs being merged.
“With these and many other emotional issues on both sides of the equation, it has created a significant decline in credit union industry consolidation in the first half,” Bartoo said. “The same can be said of the banking industry as well, as they have seen a dramatic slowing in merger activity.”
Five years ago, there were as many as 300 CU mergers a year and so far there have been 189, including a sharp drop to 37 in the second quarter. That is one of the lowest quarterly rates, Bartoo said.
Acquiring CUs, he noted, are less eager to deplete capital and net worth ratios by taking on weaker CUs “and certainly that is the case now as compared to five years ago when that was not a particularly strong concern.”
With assessments and corporate uncertainties, CUs are less willing to take on additional risks, he said.
The consultant also noted that the lead time for mergers to occur has lengthened significantly in many cases in recent months. Whereas mergers might be completed in three or four months, the lead time in some cases has stretched out to a year or more.
Bartoo's comments on merger conditions came in a status report “2011 Mid Year Credit Union Merger Activity Report and Forecast” issued by his Forest Grove, Ore. firm.
Complete your profile to continue reading and get FREE access to CUTimes.com, part of your ALM digital membership.
Your access to unlimited CUTimes.com content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking credit union news and analysis, on-site and via our newsletters and custom alerts
- Weekly Shared Accounts podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the commercial real estate and financial advisory markets on our other ALM sites, GlobeSt.com and ThinkAdvisor.com
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
