Credit unions go to great lengths to differentiate themselves from the traditional banking industry.
But, according to a Pennsylvania Credit Union Association year-end report released in April, there is one area where credit unions can't say they are different from banks — dwindling numbers. And Pennsylvania's credit unions are dwindling more than almost anywhere else.
Between 2008 and 2013, the state has lost 13.7 percent of its credit unions through consolidations and mergers, according to the National Credit Union Association. State credit unions decreased by about 3 percent in 2013.
Pennsylvania was home to 6.7 percent of all credit union mergers and consolidations in that five-year span, according to the National Credit Union Association. Only California had a higher share of credit union consolidations, at just more than 7 percent.
The state fits the profile of one that would see a high number of consolidations, according to John D. Worth, the chief economist at the National Credit Union Association. Sixty percent of all Pennsylvania credit unions have assets of less than $20 million, according to the state report, and almost 30 percent are under $5 million in assets.
Worth said 90 percent of all credit union consolidations involve ones that manage less than $50 million in assets.
“The smaller credit unions just don't offer the wide variety of services for their memberships that larger credit unions can offer,” Worth said. “They're severely constrained.”
Shrinking as much as banks
Since 2009, state credit unions have dropped 12.6 percent, while Pennsylvania banks dropped 15.5 percent, according to statistics from the Federal Deposit Insurance Corp. The consolidations and closings that have dominated banking world talk over the last five years have also affected credit unions, just more quietly.
“The economic pressures are the same” on credit unions and banks, said Michael Wishnow, senior vice president for communications and marketing at the Pennsylvania Credit Union Association. “Interest rates, compliance environments, consumer economics, they're all the same.”
He said scale is likely the reason credit union consolidation flies under the radar more than bank consolidation.
“Put all of our (Pennsylvania) credit unions together, and we're still one-third the size of PNC (Bank),” Wishnow said.
Worth said the strategy is different when it comes to credit union consolidations, however. Because credit unions are nonprofit and don't have stockholders, there is no major financial benefit to a consolidation.
“We've surveyed consolidated credit unions, and 45 percent of them say the No. 1 reason they were consolidated was for more services for their membership,” he said. “It just makes sense.”
Two Chambersburg credit unions — Patriot Federal Credit Union and Community of Healthcare Employees Credit Union — merged last year for that reason, according to Tom Iacona, Patriot corporate affairs officer.
He said Patriot — which had assets of $437 million at the time — was much bigger than CHECU — which had assets of $7.5 million — and it was becoming “increasingly challenging” for the smaller credit union to serve its membership.
CHECU went from one branch and no ATMs to seven branches and 17 ATMs with Patriot, Iacona said, in addition to other services the smaller credit union could not provide.
In 2009, savings assets at Pennsylvania credit unions rose 14.9 percent from the previous year, according to the Pennsylvania credit union report. Savings growth has fallen every year since then, and it grew just 2.1 percent in 2013.
When the stock market is in turmoil, Wishnow said, people traditionally look to credit unions for safer savings destinations. Now that the stock market is thriving, he said, more people put their savings there.
The consolidations are going up this year already in Pennsylvania, with 11 so far in 2014 compared to 15 in all of 2013, Wishnow said.
When HD Federal Credit Union in Springettsbury Township merges with White Rose Credit Union in York by the end of May — a merger already approved by the state — it will be the 12th.
Wishnow said he's aware of about “three or four” other credit unions talking possible consolidation.
“If it's good for the members, to the extent that they will receive a broader range of products and services, then it's probably a good thing,” Wishnow said of the consolidation trend. “On the flip side, so is competition. But I think when you look at the rest of the world in comparison to us, most people agree we're still over-banked.”