By Glenn Christensen
NCUA approved 25 mergers in during the second quarter of 2020, a decrease from the 34 in the prior quarter. The combined assets of the merged credit unions was $404 million, which compares to $404 million in the prior quarter and $2.1 billion in the second quarter of 2019.
The mean and median assets of the merged credit unions were $31.1million and $4.3 million, respectively.
There were two acquisitions of credit unions with assets exceeding $100 million during Q2. The largest mergers included:
- ICON Credit Union, located in Boise, Idaho, which is being merged into Horizon CU ($1.1 billion) in Spokane Valley, Wash. ICON had $342 million in assets, a 12.1% net worth ratio, and 0.05% delinquent loan ratio, and 1.0% ROA.
- Geico Federal Credit Union based in Chevy Chase, Md., which is being merged into Baxter CU ($3.9 billion) in Vernon Hills, Ill. Geico had $137 million in assets, an 8.8% net worth ratio, a 1.8% delinquent loan ratio, and -0.26% ROA.
Merger Stats
The median size of acquiring credit unions was $388 million. There were nine credit union acquirers with assets exceeding $1 billion.
With $3.9 billion in assets, Baxter CU was the largest acquiring credit union in Q2. The other continuing credit unions with assets exceeding $1 billion included:
- Texas Dow Employees CU ($3.6B)
- Chartway FCU ($2.2B)
- Capital Communications ($1.9B)
- South Carolina FCU ($1.8B)
- Abound FCU ($1.7B)
- Barksdale FCU ($1.5B)
- Horizon CU ($1.1B)
- Superior CU ($1.1B)
The acquired credit unions on average represented 3.5% the of the assets of the acquiring credit unions. The nearest merger of equals was the $15.6-million Golden FCU, which merged into the $27-million Employees CU, reflecting a 58% acquiree/acquirer ratio.
There were four credit unions with less than $1 million in assets that were acquired. The smallest credit union merger involved Orange FCU based in Orange, Texas, which had just $315,000 in assets.
Reasons For Mergers
When seeking regulatory approval credit unions are required to cite the reason for the merger. Of the 32 mergers in Q2, the following reasons were given:
- Expanded Services: 21
- Poor Financial Condition: 3
- Lack of Sponsor Support: 1
Financial Performance
The median net worth ratio of the merging credit unions was 12.2%. There were four credit unions that had net worth ratios below 7.0%, which is considered undercapitalized.
The delinquent loans-to-total loans ratio averaged 3.32%. Eighteen of the 25 merging credit unions reported negative earnings year to date. The mean return-on-assets (ROA) was -2.61% and median -0.48% for Q2 of 2020.
Below is a chart of the NCUA merger approvals for Q2 2020.
Glenn Christensen is with CEO Advisory Group. For more info: www.ceoadvisory.com.