By Glenn Christensen
Mergers approvals were down by half in May. NCUA approved 10 mergers in May 2016, which were down from 20 the previous month.
The number of mergers were down and the combined assets of merged credit unions were also down nearly $129 million compared to the prior month. For the month of May, the total merged assets were $236 million, which is down significantly compared to last year’s $787 million. That’s a difference of $571 million. The mean and median assets of merged credit unions were up $21.6 million and $10.3 million respectively. In contrast, in April 2016 the mean assets were just $17.3 million, and that was with double the number of mergers.
There were no acquisitions of credit unions with assets exceeding $100 million during May.
The largest merger was San Antonio-based Alamo Credit Union ($45 milion) merging into Pentagon Credit Union ($20 billion) in Alexandria, VA. Alamo CU was poorly capitalized (6.5% Net Worth), had moderate delinquency (0.71%) and was losing money (-1.69% ROA). “Poor Financial Condition” was given as the reason for the merger.
Credit Union Merger Stats
The median size of acquiring credit unions was $ 144 million. There were two credit union acquirers with assets exceeding $1 billion. As noted, with $19.9 billion in assets, PenFed was the largest acquiring credit union in May. The other CU with assets exceeding $1 billion was Coastal Credit Union in Raleigh, N.C.
The acquired credit unions on average represented 1% of the assets of the acquiring credit unions.
There was one merger of equals, between Lamar, Colo.-based Fellowship Credit Union ($12 million) and Las Animas, Colo.-based Arkansas Valley Credit Union ($12 million)
Only one credit union with less than $1 million in assets was acquired. Delaware River Employees Credit Union, based in Bridgeport, N.J., with just $616,000 in assets, was acquired by $21-million Fort Billings Credit Union in Paulsboro, N.J.
Reasons for Credit Union Mergers
When seeking regulatory approval credit unions are required to site the reason for the merger. Of the 10 mergers in May, the following reasons were given:
- Expanded services: 7
- Poor financial condition: 2
- Loss/declining field of membership: 1
The median net worth ratio of the merging credit unions is 8.7%. Two credit unions had a net worth ratio below 7.0% and as a result were considered under-capitalized.
The delinquent loans-to-total loans ratio averaged 2.1%.
Four of the 10 of the merging credit unions reported positive earnings year to date. The mean return-on-assets (ROA) was -1.1% and median -0.7% for May of 2016.
Below is a chart of the NCUA merger approvals for May 2016.
Glenn Christensen is with CEO Advisory Group. For more info: www.ceoadvisory.com.