By Glenn Christensen
NCUA approved 19 mergers during August 2016, which as an increase over the 11 approved the prior month.
The number of mergers were up and the combined assets of merged credit unions were also up nearly $86 million compared to the previous month. For August, the total merged assets were up slightly to $234 million, compared to the previous year’s $223 million. The mean and median assets of merged credit unions were down to $12.3 million and $4.2 million, respectively.
Large Credit Union Mergers
There were no acquisitions of credit unions with assets exceeding $100 million during August.
The largest merger was Miami-based Ryder System Credit Union ($40 million) merging into Power Financial Credit Union ($570 million), headquartered in Pembroke Pines, Fla. Ryder System was very well capitalized (22% Net Worth) and had low delinquency (0.25%), but was losing money (-0.34% ROA). “Expanded Services” was given as the reason for the merger.
Credit Union Merger Stats
The median size of acquiring credit unions was $229 million. There were give credit union acquirers with assets exceeding $1 billion. With $20.2 billion in assets, Pentagon FCU was the largest acquiring credit union in August.
Other credit union with assets exceeding $1 billion included that were involved in mergers included:
- Affinity Credit Union, Basking Ridge, N.J. ($2.5 billion).
- South Carolina Credit Union, North Charleston ($1.5 billion).
- Trustone Financial Credit Union, Plymouth, Minn. ($1.1 billion.
- Harborstone Credit Union, Tacoma, Wash. ($1.2 billion)
The acquired credit unions on average represented less than 1% of the assets of the acquiring credit unions.
The nearest merger of equals is was Jeannette, PA based Elliott Commmunity Credit Union ($33M) and Cranberry Township, Penn.-based MSA Employees Credit Union($11 million), which represents a third of the acquirer’s assets.
There were four credit unions with less than $1 million in assets that were acquired. The smallest credit union was Cornerstone Baptist Church Credit Union based in Brooklyn, N.Y. with $ 49,699 in assets, which is being acquired by $60 million Consumer Credit Union, also headquartered in Brooklyn, N.Y.
Reasons for Credit Union Mergers
When seeking regulatory approval credit unions are required to cite the reason for the merger. Of the 16 mergers in August, the following reasons were given:
- Expanded services: 12
- Poor financial condition: 3
- Inability to Obtain Officials: 1
- Lack of Growth: 2
- Lack of Sponsor Support: 1
Financial Performance of Acquired Credit Unions
The median net worth ratio of the merging credit unions was 14.4%. Four credit unions had a net worth ratio below 7.0% and are considered under-capitalized. The delinquent loans-to-total loans ratio averaged 13.6%
Five of the 16 of the merging credit unions reported positive earnings year to date. The mean return-on-assets (ROA) is -1.63% and median -0.76% for August of 2016.
Below is a chart of the NCUA merger approvals for August 2016.
Glenn Christensen is with CEO Advisory Group. For more info: www.ceoadvisory.com.