By Glenn Christensen
Mergers approvals are off to a slow start this year. NCUA approved 15 mergers in February 2016, which is equal to the number of approvals from one month earlier. Although a fairly low approval number it is nearly twice the number of mergers from February of last year.
The combined assets of merged credit unions is up nearly $40 million compared to the previous month. For February, the total merged assets was $550 million compared to last year’s $210 million. The mean and median assets of merged credit unions were $36.6 million and $14.6 million respectively. In contrast, during December 2015 the mean assets number was $34.0 million.
There was one acquisition of credit unions with assets exceeding $100 million in February.
The largest merger was Woodbridge, Va.- based Belvoir Credit Union ($325M) merging into Pentagon Federal, better known as PenFed, which is headquartered in Arlington, Va. Belvoir CU is well capitalized (8.3% net worth), has low delinquency (0.9%) and profitable (0.3% ROA). “Expanded Services” was given as the reason for the merger.
The median size of acquiring credit unions was $301 million. There were four credit union acquirers with assets exceeding $1 billion, and with $19 billion in assets, Pentagon Federal was the largest acquiring credit union in February.
Other credit unions involved in mergers during February that had assets exceeding $1 billion included:
- Atlanta Postal Credit Union, Atlanta, Ga. ($2.0B)
- Ascend Federal Credit Union, Tullahoma, Tenn. ($1.8B)
- Metro Credit Union, Chelsea, Mass. ($1.5B)
The acquired credit unions on average represented 2% of the assets of the acquiring credit unions.
The nearest merger of equals was among Charlotte, N.C.-based Carolina Postal Credit Union ($84M) and Kannapolis, N.C.-based Southern Select Community Credit Union ($33M).
There was one credit union with less than $1 million in assets that was acquired: Menard Credit Union in Chester, Ill. with $365,000 in assets. It was being acquired by $301 million SIU Credit Union headquartered in Carbondale, ll.
Reasons for Credit Union Mergers
When seeking regulatory approval credit unions are required to site the reason for the merger. Of the 15 mergers in February, the following reasons were given:
- Expanded services: 9
- Poor financial condition: 2
- Inability to obtain officials: 1
- Conversion to or merger with NFICU
- Lack of sponsor support: 1
- Lack of growth: 1
The median net worth ratio of the merging credit unions was 10.1%. Only one credit union had a net worth ratio below 7.0% and would have been considered under-capitalized. The delinquent loans-to-total loans ratio averages 1.8%.
Eleven of the 15 of the merging credit unions reported positive earnings year to date. The mean return-on-assets (ROA) was 0.01%.
Below is a chart of the NCUA merger approvals for February 2016.
Glenn Christensen is with CEO Advisory Group. For more info: www.ceoadvisory.com.