Cornelius Crean figures his credit union has two choices: It can either accept that it will have to merge with another credit union in coming years, or it can expand and try to revitalize its stagnating membership base.

Crean, CEO of Lynn-based Massachusetts Postal Employees Credit Union (MPECU), certainly can’t look to the U.S. Postal Service for expanded membership, he pointed out. The organization is cutting hundreds of thousands of jobs nationwide, and as a credit union that draws members exclusively from postal employees and their families, Crean is matter-of-fact about the growth outlook.

“It’s not a pretty picture,” he told Banker & Tradesman.

But to fight back, the $17.6 million MPECU asked the Division of Banks to expand its charter to anyone who lives or works in Lynn and seven surrounding communities. With an expanded “community” charter, the institution can more easily to add to its membership rolls.

And MPECU isn’t alone. Last month, Boston-based First Priority Credit Union also requested an expanded charter, to include residents of Norfolk and Middlesex counties. The Worcester Police Department Credit Union filed to include more potential members as well, although the new members would still need some tie to the municipal police department.

Not In Growth Mode

The increased interest in membership expansion is just one impact of a broader economic environment. While credit unions like these are executing plans to stay independent, the possibility of a merger is ever-present. And, like banks, national figures show the industry is trending toward consolidation.

All three Bay State credit unions looking to expand are – or once were – reliant on government employees to fill their membership, which puts them at the mercy of constrained public budgets. First Priority Credit Union was formerly a postal employees-only institution, said Spokeswoman Julie Perham. It expanded once already in 2007 – to Suffolk and Essex counties – before it opted to broaden its base once again.

Perham and Crean noted that the postal service is not in growth mode; Crean said that was partly because consumer postal usage has been on the decline for years, but economics also play into it – far fewer businesses are paying for direct mail advertisements and promotion. That loss of revenue has also hurt the postal service in recent years, he added.

But the contraction in credit union membership has extended beyond public-employee credit unions, according to Pat Keefe, spokesman for trade group Credit Union National Association (CUNA). In 2010, credit union membership grew just 0.7 percent, a mere blip. In Massachusetts, credit union membership grew 1.23 percent, he added – better, but still less than usual.

Keefe blamed this on the vast consumer de-leveraging of the last few years. Aside from employee-based memberships, most people join credit unions because they want a loan of some sort, he said, and they go to the credit union to get it. But fewer loans means fewer new members.

Now’s The Time

Credit unions respond to this in several ways: Working to get more members out of their existing member base; expanding the possible membership base; or in merging with another credit union, Keefe noted – and mergers have been going at a steady clip.

According to CUNA data, credit union numbers declined by 12.29 percent between 2006 and 2010, falling to roughly 7,500 institutions nationwide. Some of that came from shuttered credit unions, Keefe acknowledged, but most of the decline came from mergers. That helped push an increase in per-institution asset averages: They rose during the same period by 45.48 percent, now standing at an average of $123.8 million per credit union.

Membership over that period rose about 5 percent, with membership rising a few percentage points per year until the 2010 plateau.

Rob Kimmett, spokesman for the Massachusetts Credit Union League, said there’s no doubt credit unions can gain economies of scale through expansion, and added that some institutions said they feel now is a good time to try to expand. Consumers are far from complacent regarding their financial situations, and headlines about new bank fees, for example, might be enough to lead bank customers elsewhere.

But it’s not always easy to grab droves of new customers. Crean said if his institution got expansion approval, a likely next step would be to change the credit union’s name and work on ways to attract new customers. Still, competition is stiff: He counts five other sizable credit unions in his prosepctive new territory.

Crean noted that if he does nothing as postal employees dwindle, a merger is inevitable. If the planned expansion doesn’t bring in enough new members, well, he’ll end up merging regardless.

But at the moment, the institution has a high capital level and is in a comfortable position – and he said if there ever was a time to get moving, this is it.