By Glenn Christensen
Reversing a trend, the number of mergers was up in the most recent monthly data when compared to last year. The NCUA approved 19 mergers in May 2015, an increase over the 16 mergers in May of last year.
Not only was the number of mergers larger, the combined assets was larger. Total assets of the merged credit unions was nearly $787 million, compared to last year’s $518 million. The mean and median assets of merged credit unions were $41.4 million and $10.6 million, respectively. In contrast, last month the mean assets were nearly $60 million.
There were two mergers with credit unions exceeding $100 million in assets.
The largest merger was Visterra Credit Union’s ($336 million) into Riverside, Calif.- based Altura Credit Union ($339 million). Both these credit unions showed strong financials. Altura Credit Union will be the surviving charter. Barbara Purvis, Visterra CU Chairwoman, stated in a press release: “Following the major challenges experienced during the Great Recession, some of which still linger, Visterra’sbBoard began exploring opportunities and ideas that would ensure Visterra’s long-term survival in a changed marketplace. A merger with Altura quickly emerged as the best option for maintaining and improving our range of products and the level of member service that you expect and deserve.”
In Topeka, Kan., Educational Credit Union ($198 million) is merging into Quest Credit Union ($267 million). The membership has approved the merger with 86% voting in favor. “Convenient branch locations aren’t enough anymore,” said Quest CEO Vicki Hurt in a statement. “Consumers want convenience delivered straight to them, and that takes electronic services and technology.”
Credit Union Merger Stats
The median size of acquiring credit unions during May was $208 million. There were two credit union acquirers with assets exceeding $1 billion. With $1.6 billion in assets, State Department Credit Union, based in Alexandria, Va., was the largest acquiring credit union in May, merging $13 million S.C. Members First Credit Union. The $1-billion Fox Communities Credit Union in Appleton, Wis., merged in the $33-million Maritime Credit Union in Two Rivers, Wis.
During May, the acquired credit unions on average represented only 12% of the assets of the acquiring credit unions.
Two credit unions with less than $1 million in assets were acquired. The smallest credit union is Our Lady of Angels CU, Trenton, N.J., with $338,000 in assets, which is being acquired by $11.1 million Saints Margaret & Gregory CU.
Reasons for Credit Union Mergers
“Expanded services” continues to be the primary factor motivating these mergers. “Poor financial condition” was the reason for the merger cited by one of the credit unions. “Lack of sponsor support” was also cited as a reason for the merger.
Financial Performance of Acquired Credit Unions
The median net worth ratio of the merging credit unions was 10.1%. Three credit unions had net worth ratios below 7.0%.
The delinquent loans-to-total loans ratio averages 1.9%, which is primarily attributed to two credit unions with delinquency ratios exceeding 5% of loans. This includes the 13% delinquency ratio reported by G.B.B.R Credit Union.
Only six of the 19 of the merging credit unions reported positive earnings year to date. The mean return-on-assets (ROA) is -0.7% and median -0.2% through March of this year.
Below is a chart of the NCUA merger approvals for May 2015.
Glenn Christensen is with CEO Advisory Group. For more info: www.ceoadvisory.com.