Credit Union Merger Approvals – March 2016

Mergers approvals picked up in March.  NCUA approved 23 mergers in March 2016 which is the highest approval rate so far this year.  March credit union merger approvals is nearly twice the number of mergers from March of last year.

Although the number of mergers is up, the combined assets of merged credit unions is down nearly $120 million compared to last month.  For the month of March the total merged assets is $370 million compared to last year’s $237 million.  The mean and median assets of merged credit unions is $16.1 million and $4.8 million respectively.  In contrast, last month the mean assets was $33.0 million.

Large Credit Union Mergers

There was one acquisition of credit unions with assets exceeding $100 million this month.

The largest merger was New York, NY based Montauk Credit Union ($162M) merging into Bethpage CU ($6B) headquartered in Bethpage, NY.  Montauk CU is poorly capitalized (1.7% Net Worth), has very high delinquency (24.4%) and losing money (-10.7% ROA).  “Poor Financial Condition” was given as the reason for the merger.

Credit Union Merger Stats

The median size of acquiring credit unions is $572 million.  There are seven credit union acquirers with assets exceeding $1 billion.

With $6.4 billion in assets Bethpage CU, was the largest acquiring credit union in March.

Other credit unions with assets exceeding $1 billion included:

• Michigan State University CU, East Lansing, MI ($3.0B)
• Unify Financial CU, Torrance, CA ($2.2B)
• American CU, Philidelphia, PA ($1.6B)
• Bayport CU, Newport News, VA ($1.4B)
• Hapo Community CU, Richland, WA (1.4B)
• Credit Union of Southern California, Whittier, CA ($1.0B)

The acquired credit unions on average represent 2% of the assets of the acquiring credit unions.

The nearest merger of equals is among King of Prussia, PA based Reliance Credit Union ($24M) and Philadelphia, PA based Pennypack Credit Union ($5M).

There are two credit union with less than $1 million in assets being acquired.  The smallest credit union is Rector Credit Union based in Philadelphia, PA with $138,000 in assets, which is being acquired by $301 million American Credit Union headquartered in Philadelphia, PA.

Reasons for Credit Union Mergers

When seeking regulatory approval credit unions are required to site the reason for the merger.  Of the 23 mergers in March, the following reasons were given:

• Expanded services: 12
• Poor financial condition: 7
• Inability to obtain officials: 1
• Conversion to or merger with NFICU: 2
• Lack of sponsor support: 1

Financial Performance of Acquired Credit Unions

The median net worth ratio of the merging credit unions is 8.2%. Seven credit unions have a net worth ratio below 7.0% and are considered under-capitalized.

The delinquent loans-to-total loans ratio averages 3.9%.

Five of the 23 of the merging credit unions reported positive earnings year to date.  The mean return-on-assets (ROA) is -4.4% and median -1.0% through December of 2015.

Below is a chart of the NCUA merger approvals for March 2016: