By Ray Birch
LAKE TAPPS, Wash.—When it comes to mergers, who are the top credit union acquirers by total acquired assets over the last 20 years?
The $26.3-billion Pentagon FCU, Vienna, Va., tops the list with $2.7 billion in acquired CU assets, while $5-billion State Farm FCU in Bloomington, Ill., is second with $2.4 billion in acquired assets. Other top acquirers include the $5.5-billion DFCU Financial in Dearborn, Mich. with 2.3 billion in acquired assets), which is tied for third with the $22.5-billion SchoolsFirst FCU in Santa Ana, Calif., which has merged in $2.3 billion in acquired assets over the past two decades.
That’s according to CEO Advisory Group’s new interactive merger research tool which sheds light on the credit unions making the biggest merger moves within the industry. For the top ten list click here.
Different Tactics
CEO Advisory Group’s Glenn Christensen pointed out the top four shops have gone about their merger efforts differently.
He said Pentagon has completed a large number of smaller-size mergers (30), whereas DFCU made the list from one unique merger. In 2008, the larger $2-billion DFCU merged into $203-million Lansing, Mich.-based CapCom CU to achieve a state charter, but kept its name. State Farm’s total comes largely from the aggregation of 13 separate State Farm CUs across the country. SchoolsFirst has completed five mergers.
“This tool gives a great deal of insight into what is happening within credit union mergers today,” said Christensen.
One thing the tool’s data show is clearly happing more often, is interstate mergers, explained Christensen.
“Interstate mergers are going to be much more common and it won't be uncommon to find the biggest acquirer within the state to be a credit union from outside the state,” said Christensen. “That is what our database is indicating.”
Several factors are making the out-of-state deals more common, said Christensen.
“We're becoming more digital as consumers, so geography doesn't play as important a role in choosing a credit union as it used to,” explained Christensen. “Going forward I think we’re going to see more credit unions benefit from having a partner from another state.”
With a changing consumer mindset, Christensen said credit unions, too, are thinking differently when they consider merger partners.
“They can choose a partner who they believe will offer greater value to their membership—they can expand their reach,” said Christensen, who acknowledged the number of good combinations within each CU’s geographic area is shrinking as the number of total credit unions continues to shrink.
Credit unions are choosing to expand to not only diversify their risk, membership base, and loan portfolio, but to also take advantage of growth opportunities outside their own local markets, added Christensen.
“I think the Great Recession taught credit unions a lot of lessons,” offered Christensen. “I think they learned they might be in a very cyclical market, and that they could benefit by buying into other geographic markets. They could add diversity to their loan portfolios, and to their deposit base as well. I think more are believing they can more easily withstand another economic downturn if they are not based in just one geographic region.”
Data Tell The Story
The data from the merger tool show what is occurring, stated Christensen.
“Take Alaska, for example. NuVision, from Huntington Beach, Calif., is the biggest acquirer in that state,” Christensen said.
The merger research tool shows that in 12 states CUs from outside state borders are the largest acquirers.
Christensen said CUs are getting more comfortable with merging in out-of-state credit unions.
“They're just not afraid to go beyond their borders, like they have been in the past,” Christensen said. “I have spoken with many credit unions that are looking at multi-state mergers.
Christensen said merging beyond local borders is something that had to happen to sustain the growth rate many credit unions are seeking.
“You look at this historically, look at the highest-growth credit unions in the nation, and you will see their growth is primarily through mergers,” said Christensen. “And if you look at the top 10 list they're going to be driven by acquisitions. There's no doubt that in order to achieve significant growth you have to have mergers as part of your growth strategy—it's very hard to achieve that same level of growth just organically.”
Data Back To 2000
CEO Advisory Group recently introduced the interactive merger tool. The interactive map can be customized to report on the geographic region and timeline. For more information, an interactive table has details on all completed mergers going back to 2000, Christensen explained.
“The tool gives you insight into who are active acquirers in your market and in others,” stated Christensen. “That can be very helpful when developing an acquisition strategy.”
Christensen contends that being able to see who has been active in mergers, and successful in doing so over the years can give a credit union confidence to reach an agreement.
“You can gain a sense of security that you are partnering with someone that really knows what they are doing and you know more about what they're capable of doing. This tool gives you perspective,” he said.