Credit Union Merger Approvals – 2Q2020

NCUA approved 25 mergers in Q2 of 2020 which decreased from 34 last quarter. The combined assets of merged credit unions is $404M, which compares to $404M last quarter and $2.1B a year ago.

The mean and median assets of merged credit unions are $31.1M and $4.3M, respectively.

LARGE CREDIT UNION MERGERS

There are two acquisitions of credit unions with assets exceeding $100 million this quarter.  The largest acquisitions are:

• ICON Credit Union, located in Boise, ID, which is being merged into Horizon CU ($1.1M) in Spokane Valley, WA.  ICON has $342M in assets, 12.1% net worth ratio, 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 ($3.9B) in Vernon Hills, IL.  Geico has $137M in assets, 8.8% net worth ratio, 1.8% delinquent loan ratio, and -0.26% ROA.

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CREDIT UNION MERGER STATS

The median size of acquiring credit unions is $388 million.  There are nine credit union acquirers with assets exceeding $1 billion.

With $3.9 billion in assets, Baxter CU is the largest acquiring credit union in Q2.

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

• 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 represent 3.5% the of the assets of the acquiring credit unions.

The nearest merger of equals is:

• Golden FCU ($15.6M) merging into Employees CU ($27.0M), 58% acquiree/acquirer ratio

There are four credit unions with less than $1 million in assets being acquired. The smallest credit union merger is Orange FCU based in Orange, TX with $315,000 in assets. 

REASONS FOR CREDIT UNION 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
Grand Total	25

FINANCIAL PERFORMANCE OF ACQUIRED CREDIT UNIONS

The median net worth ratio of the merging credit unions is 12.2%. There are 4 credit unions that have net worth ratios below 7.0%, which is considered undercapitalized.

The delinquent loans-to-total loans ratio averages 3.32%.  Eighteen (18) 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: