By Glenn Christensen
NCUA approved 21 mergers in January 2017, an increase of one over the 18 approved in December of 2016. There is one credit union, Pentagon FCU, that merged three smaller credit unions in January, following the two it absorbed in mergers in one month prior.
While the number of mergers is up, the combined assets of the merged credit unions is down nearly $ 512 million when compared to December of 2016. However, in January of 2017, the total merged assets were up markedly to $1.1 billion, compared the $485 million of merged assets of January 2016. That’s an increase of approximately $649 million.
The mean and median assets of merged credit unions are $54 million and $17.1 million, respectively.
There were six acquisitions of credit unions with assets exceeding $100 million during the first month of this year.
The largest merger was between Scranton, Penn.-based Valor Credit Union ($228M) and Pentagon Credit Union ($20.7B), headquartered in Alexandria, VA. Valor Credit Union was poorly capitalized (5.5% net worth), had a moderate delinquency rate (2%) and was losing money (-1.0% ROA). “Poor Financial Condition” was given as the reason for the merger.
The median size of acquiring credit unions was $449 million. There were four credit union acquirers with assets exceeding $1 billion.
With $20.7 billion in assets, Pentagon FCU was the largest acquiring credit union in January.
Other credit union with assets exceeding $1 billion that were involved with mergers included:
- Northeast Credit Union, Portsmouth, N.H. ($1.1B)
- Hanscom Credit Union, Hanscom AFB, Mass. ($1.2B)
- Midflorida Credit Union, Lakeland, Fla. ($2.6B)
The acquired credit unions, on average, represented 3% the of the assets of the acquiring credit unions.
The nearest merger of equals was between Saint James, Minn.-based St. James Public Schools Credit Union ($2.3M) and Northern Energy Credit Union ($3.0M) headquartered in Mankato, Minn..
There was one credit union with less than $1 million in assets that was acquired: GCIU Local 235 Credit Union, based in Independence, Mo., with just $113,335 in assets. It was acquired by the $51-million Central Communications Credit Union, also headquartered in Independence.
Reasons for Credit Union Mergers
When seeking regulatory approval credit unions are required to cite the reason for the merger. Of the 21 mergers in January, the following reasons were given:
- Expanded services: 13
- Poor Financial Condition: 4
- Inability to Obtain Officials: 3
- Lack of Growth: 1
The median net worth ratio of the merging credit unions was 9.8%. Four credit unions had a net worth ratio below 7.0% and were considered under-capitalized.
The delinquent loans-to-total loans ratio averaged 2.8%
Ten of the 21 of the merging credit unions reported positive earnings year to date. The mean return-on-assets (ROA) was -0.60% and median -0.08% for January of 2017.
Below is a chart of the NCUA merger approvals for January 2017.
Glenn Christensen is with CEO Advisory Group. For more info: www.ceoadvisory.com.