By Glenn Christensen
Mergers approvals picked up in March, with NCUA approving 23 mergers in March 2016, which is the highest approval rate so far this year. March 2016 credit union merger approvals is nearly twice the number of mergers from March of last year.
Although the number of mergers is up, the combined assets of merged credit unions is down nearly $120 million compared to last month. For the month of March the total merged assets is $370 million compared to last year’s $237 million. The mean and median assets of merged credit unions is $16.1 million and $4.8 million respectively. In contrast, last month the mean assets was $33.0 million.
Large Credit Union Mergers
There was one acquisition of credit unions with assets exceeding $100 million this month.
The largest merger was New York, N.Y.-based Montauk Credit Union ($162M) merging into Bethpage CU ($6 billion), headquartered in Bethpage, N.Y. Montauk CU was poorly capitalized (1.7% Net Worth), had very high delinquency (24.4%) and losing money (-10.7% ROA). The official reason for the merger was listed “Poor Financial Condition,” but Montauk CU was undone by erosion of its loan portfolio, which was primarily made up of taxi medallion loans that had decreased in value due to emergence of ride share services such as Uber.
Credit Union Merger Stats
The median size of acquiring credit unions was $572 million. There are seven credit union acquirers with assets exceeding $1 billion.
With $6.4 billion in assets Bethpage CU, was the largest acquiring credit union in March.
Other credit unions with assets exceeding $1 billion included:
- Michigan State University CU, East Lansing, Mich. ($3.0B)
- Unify Financial CU, Torrance, Calif. ($2.2B)
- American CU, Philidelphia ($1.6B)
- Bayport CU, Newport News, Va. ($1.4B)
- Hapo Community CU, Richland, Wash. (1.4B)
- Credit Union of Southern California, Whittier, Calif. ($1.0B)
The acquired credit unions on average represent 2% of the assets of the acquiring credit unions.
The nearest merger of equals is among King of Prussia, Penn.-based Reliance Credit Union ($24M) and Philadelphia-based Pennypack Credit Union ($5M).
There are two credit union with less than $1 million in assets being acquired. The smallest credit union is Rector Credit Union based in Philadelphia with $138,000 in assets, which is being acquired by $301-million American Credit Union headquartered in Philadelphia.
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: 12
- Poor financial condition: 7
- Inability to obtain officials: 1
- Conversion to or merger with NFICU: 2
- Lack of sponsor support: 1
Financial Performance of Acquired Credit Unions
The median net worth ratio of the merging credit unions was 8.2%. Seven credit unions have a net worth ratio below 7.0% and are considered under-capitalized.
The delinquent loans-to-total loans ratio averaged 3.9%.
Five of the 23 of the merging credit unions reported positive earnings year to date. The mean return-on-assets (ROA) was 4.4% and median -1.0% through December of 2015.
Below is a chart of the NCUA merger approvals for March 2016: