By Glenn Christensen
The NCUA approved 22 mergers in November 2014, which is up from the 17 mergers in November of last year.
The combined assets of the merged credit unions are $434 million. The mean and median assets of merged credit unions are $19.8 million and $7.5 million respectively.
There were four mergers with credit unions exceeding $50 million in assets.
Southland CU ($484 million) based in Los Alamitos, Calif., received NCUA approval to merge with Tustin, Calif. based Patriots FCU. “Poor Financial Condition” is the motivating factor for Patriots merger. This financially struggling credit union has $76-million in assets, 3.91% net worth to asset ratio and a long history of negative earnings.
Wichita, Kan.- based Central Star CU with $71-million in assets received approval to merge into $460-million asset Golden Plains CU headquartered in Garden City, Kan. “Expanded Services” is cited as the reason for the merger. Through September Central Star reported net worth ratio of 8.5%, delinquency ratio of 2.0% and ROA of -0.75%
The median size of acquiring credit unions is $552 million. There were three credit union acquirers with assets exceeding $1 billion. With $2.4 billion in assets Service CU, based in Portsmouth, N.H., was the largest acquiring credit union in November, merging Berlin, N.H.-based Guardian Angel CU. Keesler CU, which is merging Hattiesburg-based Wesley Health Systems CU with $3.1 million in assets, was the second largest acquirer with $1.2 billion in assets.
The acquired credit unions on average represented only 4% of the assets of the acquiring credit unions. Sacramento, Calif.-based Big Valley Credit Union had the largest impact on the acquiring credit union representing 21% of First U.S. Community CU’s assets, where the assets were $56 million and $263 million, respectively.
Only two credit unions with less than $1-million in assets are being acquired, including Dallas I.H.C. CU and St. Cecilia Parish CU.
The median net worth ratio of the merging credit unions is 14.1%. Six credit unions have net worth ratios below 7.0%. Astonishingly, the tiny Dallas I.H.C. CU has a net worth ratio of 60%.
The delinquent loans-to-total loans ratio averages 2.9%, which is primarily attributed to two credit unions with delinquency ratios exceeding 9% of loans.
Only one of the 22 credit unions had positive earnings. Consequently the mean return-on-assets (ROA) is -2.26% year through September of 2014.
“Expanded services” continues to be the primary factor motivating these mergers. “Poor financial condition” was the reason for the merger sited by five of the credit unions.
Below is a chart of the NCUA merger approvals for November 2014.
Glenn Christensen is with CEO Advisory Group and can be reached at glennc@ceoadvisory.com.