By Glenn Christensen
The NCUA approved 19 mergers in December 2014, which is up from the 28 mergers in December of last year.
Very small, boutique credit unions were absorbed in December. The combined assets of the merged credit unions were $88 million. The mean and median assets of merged credit unions were $5.5 million and $3.2 million respectively. In contrast, in November the mean assets were $19 million.
There were no mergers with credit unions exceeding $50 million in assets. In fact, the largest merger was $28-million Silver City, N.M.-based Chino Credit Union, which was approved to merge into First Financial Credit Union ($425 million) based out of Albuquerque. “Poor Financial Condition” was cited as the reason for the merger. Through September 2014, Chino Credit Union reported a net worth ratio of 6.75%, delinquency ratio of 1.76% and ROA of 0.46%.
The median size of acquiring credit unions was $298 million. There was one credit union acquirer with assets exceeding $1 billion. With $1.5-billion in assets Educators CU, based in Racine, Wis., was the largest acquiring credit union in December, merging Racine Police CU. Intouch CU, which is merging Dallas-based New Mount Zion Baptist Church CU with under $1 million in assets, was the second largest acquirer with $818 million in assets.
The acquired credit unions on average represented only 2% of the assets of the acquiring credit unions. There were two mergers where the relative size between the merged and continuing credit unions made for what were semi-near mergers of equals. In Virginia, Richmond Police Department CU, with $6.2 million in assets, represented 42% of Richmond Fire Dept CU’s $14.8 million assets. With $5.9 million in assets, Mountain Community CU in Georgia accounted for 42% of Catoosa Teachers CU assets.
Four credit unions with less than $1 million in assets were being acquired. The smallest credit union was Golden CU in Columbus, Ga., with $379,000 in assets. Golden CU is being acquired by $8 million Regional Members CU.
The median net worth ratio of the merging credit unions was 14.0%. Two credit unions had net worth ratios below 7.0%.
The delinquent loans-to-total loans ratio averaged 3.8%, which is primarily attributed to three credit unions with delinquency ratios exceeding 10% of loans. This includes the 16% delinquency ratio reported by New Mexico Correctional Employees FCU.
Only eight of the 19 credit unions had positive earnings year to date. Consequently the mean return-on-assets (ROA) was -1.1% through September of last year.
“Expanded services” continues to be the primary factor motivating these mergers. “Poor financial condition” was cited as the reason for the merger by just four of the credit unions. “Inability to obtain officials” was also cited as a reason for the merger.
Below is a chart of the NCUA merger approvals for December 2014:
Glenn Christensen is CEO of CEO Advisory Group, and can be reached at glennc@CEOAdvisory.com.