By Glenn Christensen
The number of mergers during October in credit unions was down compared to the previous month and last year. The NCUA approved 19 mergers in October 2015, which is down from the 28 mergers last month and 28 in October of 2014.
The combined assets of merged credit unions also declined compared to the previous month. Total assets of the merged credit unions is $295 million compared to last year’s $458 million. The mean and median assets of merged credit unions were $15.5 million and $3.4 million respectively. In contrast, in September the mean assets were $14.3 million.
Large Credit Union Mergers
There were no acquisitions of credit unions with assets exceeding $100 million this month.
The largest merger was Falls Church, VA based CSC Employees Credit Union ($82M) merging into Lafayette FCU ($391M) in Kensington, Md. CSC Employees CU was well capitalized (12.9%) and had low delinquency (0.2%).
“We are beyond excited about what this combined credit union will bring to both membership groups,” said LFCU Chairman Norman Cohen. “Adding together the capabilities, experience and vision of the financial professionals from the two entities will position us for success for many years to come. We couldn’t be more delighted about this partnership and know it will result in a bigger and absolutely better than ever credit union.”
Credit Union Merger Stats
The median size of acquiring credit unions was $294 million. There were two credit union acquirers with assets exceeding $1 billion.
With $1.3 billion in assets Empower Federal Credit Union in Syracuse, N.Y. was the largest acquiring credit union in October, merging in $49-million Focal Point Credit Union.
The $1.1-billion Hansom FCU located at Hanscom AFB in Massachusetts acquired Devens-based W.H. Nichols Employees Credit Union, which had just over $1 million in assets.
The acquired credit unions on average represented 5% of the assets of the acquiring credit unions.
The nearest merger of equals was among New Haven, Conn.-based Healthcare Financial Credit Union ($34M) and Bridgeport, Conn.-based Bridgeport Hospital Credit Union ($21M).
There were three credit unions with less than $1 million in assets that were acquired. The smallest credit union was The Triumph Baptist Credit Union based in Philadelphia, with $378,000 in assets, which was acquired by $341 million South Jersey Credit Union headquartered in Deptford, N.J.
Reasons for Credit Union Mergers
When seeking regulatory approval credit unions are required to site the reason for the merger. Of the 19 mergers in October, the following reasons were given:
- Expanded services: 14
- Lack of sponsor support: 2
- Lack of growth: 1
- Poor financial condition: 1
- Poor management: 1
Financial Performance of Acquired Credit Unions
The median net worth ratio of the merging credit unions was 12.9%. Only one credit union had a net worth ratio below 7.0% and was considered under-capitalized.
The delinquent loans-to-total loans ratio averaged 2.5%, which was primarily attributed to three credit unions with delinquency ratios exceeding 5% of loans, including 23% delinquency at $1.5 million asset Noxen Community Credit Union.
Only seven of the 19 of the merging credit unions reported positive earnings year to date. The mean return-on-assets (ROA) is -0.3% and median -0.2% through September of this year.
Below is a chart of the NCUA merger approvals for October 2015.
Glenn Christensen is with CEO Advisory Group. For more info: www.ceoadvisory.com.