Credit Union Merger Approvals 2Q 2019

NCUA approved 31 mergers in Q2 of 2019 which increased from 28 last quarter. The combined assets of merged credit unions is $2.1B, which compares to $1.3B last quarter and $800M year ago.

The mean and median assets of merged credit unions are $66M and $8.2M, respectively.

LARGE CREDIT UNION MERGERS

There are three acquisitions of a credit unions with assets exceeding $100 million this quarter:

• Inspirus CU, located in Seattle, WA, which is being merged into GESA CU ($2.1B) in Richland, WA.  Inspirus has $1.3B in assets, 10.5% net worth ratio, 0.35% delinquent loan ratio, and 1.14% ROA. 
• Deer Valley CU, based in Phoenix, AZ, is merging into Canyon State CU also headquartered in Phoenix.  Deer Valley CU is the larger of the two CUs with $248M in assets, 8.8% net worth ratio, 0.5% delinquency ratio, and 0.78% ROA.  In contrast Canyon State CU has assets of $193M, 9.8% net worth ratio, 0.6% delinquency, and 0.18% ROA.
• Partnership CU located in Washington, D.C. is being acquired by NASA headquartered in Upper Marlboro, MD. Partnership has strong cap (9.9% Net Worth), low delinquency (0.23%), and profitable (0.63%).

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CREDIT UNION MERGER STATS

The median size of acquiring credit unions is $155 million.  There are five credit union acquirers with assets exceeding $1 billion.

With $2.5 billion in assets, NASA is the largest acquiring credit union in Q2.

The other continuing credit unions with assets exceeding $1 billion were:

• Community Choice ($1.1B)
• Educational Systems ($1B)
• Spire($1.1B)
• GESA ($2.1B)

The acquired credit unions on average represent 15% the of the assets of the acquiring credit unions.

The nearest merger of equals are:

• Deer Valley CU ($248M) merging into Canyon State CU ($193.2M), 128% acquiree/acquirer ratio
• Metro North CU, MI ($46M) merging into Birmingham-Bloomfield CU, MI ($69M), 67% acquiree/acquirer ratio
• Inspirus CU ($1.3B) merging into GESA CU ($2.1B), 63% acquiree/acquirer ratio

There are six credit unions with less than $1 million in assets being acquired. The smallest credit union merger is Cosmopolitan FCU based in Chicago, IL with $44,000 in assets at yearend 2018, and whose assets and members had declined to $26,000 and 21, respectively, as of June 2019. 

REASONS FOR CREDIT UNION MERGERS

When seeking regulatory approval credit unions are required to cite the reason for the merger.  Of the 31 mergers in Q2, the following reasons were given:

• Expanded Services: 26
• Poor Financial Condition: 1
• Inability to Obtain Officials: 3
• Lack of Growth: 1
• Loss/Declining Field of Membership: 1

FINANCIAL PERFORMANCE OF ACQUIRED CREDIT UNIONS

The median net worth ratio of the merging credit unions is 12.75%. There is 1 credit union that has net worth ratio below 7.0%, which is considered undercapitalized. This was Healthcare 1st CU which had a 6.86% net worth ratio.

The delinquent loans-to-total loans ratio averages 6.17%

Seventeen (17) of the 31 of the merging credit unions reported negative earnings year to date.  The mean return-on-assets (ROA) was -0.98% and median -0.13% for Q2 of 2019.

Below is a chart of the NCUA merger approvals for Q2 2019: