Credit Union Merger Approvals – Q4 2018

NCUA approved 53 mergers in Q4 of 2018 which increased from 52 last quarter. The combined assets of merged credit unions is $1.5B, which compares to $2.1B last quarter and $1B year ago.

The mean and median assets of merged credit unions are $29M and $9M, respectively.

LARGE CREDIT UNION MERGERS

There were two acquisitions of a credit unions with assets exceeding $100 million this month.

The largest was Progressive located in New York, NY acquired by Pentagon headquartered in McLean, VA. Progressive has low cap (-1.58% Net Worth), high delinquency (26%), and unprofitable (-25.87%).

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CREDIT UNION MERGER STATS

The median size of acquiring credit unions is $280 million.  There are 3 credit union acquirers with assets exceeding $2 billion.

With $24 billion in assets, Pentagon was the largest acquiring credit union in Q4.

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

• Summit ($3.1B)
• American Heritage ($2.2B)
• Trumark Financial ($2.1B)
• South Carolina ($1.7B)
• Nuvision ($1.6B)
• Central Minnesota ($1.1B)
• Collins Community ($1.2B)
• Arrowhead Central ($1.3B)

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

The nearest merger of equals is:

Aurora, IL based Fox Valley ($18M) merging into Allsteel ($21M) headquarted in Oswego, IL.

There are two credit unions with less than $1 million in assets being acquired.  The smallest credit union is Star Madison based Philadelphia, PA with $32,650 in assets, which is being acquired by $3.1 Billion in assets Summit headquartered in Madison, WI.

REASONS FOR CREDIT UNION MERGERS

When seeking regulatory approval credit unions are required to cite the reason for the merger.  Of the 53 mergers in Q4, the following reasons were given:

• Expanded Services: 43
• Poor Financial Condition: 4
• Inability to Obtain Officials: 1
• Loss/Declining Field of Membership: 3
• Conversion to or Merger with NFICU: 2

FINANCIAL PERFORMANCE OF ACQUIRED CREDIT UNIONS

The median net worth ratio of the merging credit unions is 12.16%. There is six credit unions that has a net worth ratio below 7.0%, which is considered undercapitalized. Worst was Progressive credit union which had a -1.58% net worth ratio.

The delinquent loans-to-total loans ratio averages 3.25%

Twenty-three (23) of the 53 of the merging credit unions reported positive earnings year to date.  The mean return-on-assets (ROA) was -2.70% and median -0.02% for Q4 of 2018. Below is a chart of the NCUA merger approvals for Q4 2018:

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