By Glenn Christensen
NCUA approved 39 mergers in Q3 of 2023, an increase from 36 in the prior quarter. The combined assets of the merged credit unions totals $946 million, which compares to $2.7 billion in the second quarter and $3.5-billion in Q2 of 2022. last quarter and $3.5B in Q3 2022.
The mean and median assets of merged credit unions was $24.3 million and $14.1 million, respectively.
Large Credit Union Mergers
There was one acquisition of a credit union with assets exceeding $100 million during the third quarter: the $177-million Parkside Credit Union in Westland, Mich., which is being merged into the $700-million True Community CU in Jackson, Mich.
Parkside has had a 13.1% net worth ratio, 1.1% delinquent loan ratio, and 076% ROAA LTM.
The median size of acquiring credit unions was $148 million. There were nine credit union acquirers with assets exceeding $1 billion, and 14 credit union acquirers with assets below $100 million.
With $5.1 billion in assets, Virginia CU was the largest acquiring credit union in Q3.
The acquired credit unions on average represent 3.4% of the assets of the acquiring credit unions.
There was one credit union with less than $1 million in assets that was acquired: United Methodist of Mississippi CU based in Booneville, with $555,000 in assets.
Reasons for Credit Union Mergers
When seeking regulatory approval credit unions are required to cite the reason for the merger. Of the 33 mergers in Q3, the following reasons were given:
Financial Performance of Acquired Credit Unions
The median net worth ratio of the merging credit unions was 10.3%. There were six credit unions that had net worth ratios below 7.0%, which is considered undercapitalized.
The delinquent loans-to-total loans ratio averages 1.2%. Sixteen of the 39 merging credit unions reported negative earnings during the prior 12 months. The mean return-on-assets (ROA) was -0.02% and median 0.11% the last twelve months. Below is a chart of the NCUA merger approvals for Q1 2022:
Credit Union Acquisitions of Banks
Meanwhile, bank consolidation took place at approximately the same pace as credit union mergers. There was a total of 34 bank acquisitions announced in the third quarter of 2023.
Six of the bank acquisitions were by credit unions. In total, these banks had assets of $1.4 billion, which is 50% more than the combined credit unions acquired via merger during the third quarter.
Only one credit union that acquired a bank announced the deal terms. In August 2023, Harborstone Credit Union announced its acquisition of the $175-million First Sound Bank. The transaction was reported with a Price/Tangible Book of 151% and Price/Earnings multiple of 23.4.3, according to S&P Global Market Intelligence. Among all bank acquisitions reporting deal terms, the Price/Tangible Book was 134%.
Among all acquired banks the average ROAA was 0.82%, with only two reporting a negative ROAA the last 12 months before the announced M&A transaction.
Below is a deal summary of the credit union acquisitions of banks and summary of all bank transactions:
Glenn Christensen is with CEO Advisory Group. For more info: www.ceoadvisory.com.