By Glenn Christensen
NCUA approved 19 mergers in May 2018, which was an increase over the 12 approved one month prior. The number of mergers was up as was the combined assets of the merged credit unions, up nearly $421 million compared to April.
For May, the total merged assets were down, $656 million, when compared to 2017’s $765 million, a difference $109 million. The mean and median assets of merged credit unions were $65.6 million and $9.1 million respectively.
There was one acquisition of a credit union with assets exceeding $100 million this month.
The largest credit union was Novi, Mich.-based VibeCredit Union ($543 million), which was technically acquired by the smaller Oakland County Credit Union ($368 million) in Waterford, Mich. In this merger of equals, the acquiring credit union will change its name to the merging credit union’s name, Vibe. Vibe Credit Union is well capitalized (13.31% Net Worth), has low delinquency (0.23%) and profitable (0.57% ROA). Oakland County Credit Union had a net worth ratio of 10.6%, delinquency ratio of 0.28% and ROA of 0.66%. “Expanded Services” was given as the reason for the merger.
Credit Union Merger Stats
The median size of acquiring credit unions was $270 million. There were two credit union acquirers with assets exceeding $1 billion: With $2 billion in assets, Educators Credit Union was the largest acquiring credit union in May. The other credit union with assets exceeding $1 billion wasArrowhead Central Credit Union in Rancho Cucamonga, Calif., at $1.2 billion.
The acquired credit unions on average represent 17% the of the assets of the acquiring credit unions.
The smallest credit union involved in a merger was Gorton's Of Gloucester Employees Credit Union in Massachusetts, which had $824,721 in assets. It was merged into the $91-million Luso-American Credit Union in Peabody, Mass.
Reasons for Credit Union Mergers
When seeking regulatory approval credit unions are required to cite the reason for the merger. Of the 19 mergers in May, the following reasons were given:
- Expanded Services: 15
- Poor Financial Condition: 3
- Loss / Declining Field of Membership: 1
Financial Performance of Acquired Credit Unions
The median net worth ratio of the merging credit unions was 9.75%. There were four credit unions that had a net worth ratio below 7.0%, which is considered undercapitalized.
The delinquent loans-to-total loans ratio averaged 2.73%.
Five of the 19 merging credit unions reported positive earnings year to date. The mean return-on-assets (ROA) is -0.44% and median -0.12% for May of 2018.
Below is a chart of the NCUA merger approvals for May 2018:
Glenn Christensen is CEO of CEO Advisory Group. For more info: glennc@CEOAdvisory.com.