By Glenn Christensen
For the second month in a row the number of mergers is up compared to last year. The NCUA approved 27 mergers in June 2015, which is up from the 20 mergers in June of last year.
Not only were the number of mergers was larger the combined assets was larger. Total assets of the merged credit unions was nearly $535 million, compared to last year’s $476 million. The mean and median assets of merged credit unions were $19.8 million and $7.6 million, respectively. In contrast, last month the mean assets were more than $40 million.
There was one merger with a credit union exceeding $100 million in assets. This interstate merger united Burr Ridge, Ill.-based Air Line Pilots Association Federal Credit Union ($171M) with Wausau, Wis.- based Connexus Credit Union ($1.1B). Connexus Credit Union will be the surviving charter. ALPA FCU President Steve Derebey offered this perspective on the merger: “Our members will have available to them a broader array of high quality products and services, allowing them to consolidate multiple financial institution relationships into one. Most appealing is that they will have access to 24-hour online and mobile banking, which will be very convenient to the airline pilot community. Our goal is to become a full service financial institution, from personal checking accounts, to home mortgage or home equity loans, to a worldwide network of ATMs. This is a huge leap for us and we are thrilled with the opportunity to join this organization that, almost overnight, will add tremendous value to our membership.
Credit Union Merger Stats
The median size of acquiring credit unions was $300-million. There were four credit union acquirers with assets exceeding $1 billion. With $2.1 billion in assets Community America Credit Union, based in Lenexa, Kan. was the largest acquiring credit union in June, merging $16-million Healthcare Community Credit Union. Fairfax, Va.-based Apple Credit Union, which is merging Winchester Community Credit Union with $12.7 million in assets, was the second largest acquirer with nearly $2.1 billion in assets.
The acquired credit unions on average represented 12% of the assets of the acquiring credit unions. There were no merger of equals in the month of June.
Six credit unions with less than $1 million in assets were acquired. The smallest credit union is NYC Employees CU based in Harrisburg, Ill. with $103,000 in assets, which was acquired by $300 million SIU Credit Union.
Reasons for Credit Union Mergers
There was a greater variety of reasons given for mergers in June, but “expanded services” continues to be the primary factor motivating these mergers. “Poor financial condition” was the reason for the merger cited by three of the credit unions. “Lack of sponsor support” was also cited as a reason for the merger by two credit unions. Three credit unions indicated the merger was motivated by the “inability to obtain officials.”
The median net worth ratio of the merging credit unions was 9.5%. Seven credit unions have net worth ratios below 7.0%.
The delinquent loans-to-total loans ratio averaged 3.9%, which is primarily attributed to two credit unions with delinquency ratios exceeding 10% of loans. This includes the 44% delinquency ratio reported by Bethel A.M.E. San Francisco Credit Union.
Only eight of the 27 of the merging credit unions reported positive earnings year to date. The mean return-on-assets (ROA) was -2.3% and median -0.6% through June of this year.
Below is a chart of the NCUA merger approvals for June 2015
Glenn Christensen is with CEO Advisory Group. For more info: www.ceoadvisory.com.