Credit Union Merger Approvals 2Q 2022

Credit Union Merger Approvals 2Q 2022

NCUA approved 35 mergers in Q2 of 2022 which increased from 41 last quarter. The combined assets of merged credit unions is $641M, which compares to $5.5B last quarter and $845M in Q2 2021.

The mean and median assets of merged credit unions are $18.3M and $8.9M, respectively.

To view the largest mergers nationally, by region, or state since 2000 can be found at https://ceoadvisory.com/cu-acquirers-by-state/.

LARGE CREDIT UNION MERGERS

There was one acquisition of a credit unions with assets exceeding $100 million this quarter.  The largest acquisitions are:

• Financial One CU, located in Columbia Height, MN, which is being merged into Magnifi Financial CU ($1.7B) in Melrose, MN. Financial One has $202M in assets, 9.1% net worth ratio, 0.22% delinquent loan ratio, and 1.8% ROA LTM.

CREDIT UNION MERGER STATS

The median size of acquiring credit unions is $255M.  There are 5 credit union acquirers with assets exceeding $1 billion and 8 credit union acquirers with assets below $100M.

With $35.4 billion in assets, Pentagon FCU is the largest acquiring credit union in Q2.

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

• Philadelphia ($1.7B)
• Magnifi ($1.7B)
• First Florida ($1.3B)
• Credit Union 1 ($1.2B)

The acquired credit unions on average represent 1.3% the of the assets of the acquiring credit unions.

The nearest merger of equals is:

• Corry Area Schools CU ($7M) merging into Tri State Rail CU ($16M), 45% acquiree/acquirer ratio

There is 1 credit union with less than $1 million in assets being acquired. The smallest credit union merger is Security Plus CU based in Russellville, KY with $720,000 in assets.

REASONS FOR CREDIT UNION MERGERS

When seeking regulatory approval credit unions are required to cite the reason for the merger.  Of the 33 mergers in Q3, the following reasons were given:

 

FINANCIAL

PERFORMANCE OF ACQUIRED CREDIT UNIONS

The median net worth ratio of the merging credit unions is 10.8%. There are 5 credit unions that have net worth ratios below 7.0%, which is considered undercapitalized.

The delinquent loans-to-total loans ratio averages 1.7%.  Twentytwo (22) of the 35 merging credit unions reported negative earnings last 12 months.  The mean return-on-assets (ROA) was -0.77% and median 0.34% the last twelve months.

Below is a chart of the NCUA merger approvals for Q2 2022:

 

Credit Union Acquisitions of Banks

Bank consolidation was at approximately the same pace as credit union mergers.  There was a total of 36 bank acquisitions announced in the second quarter of 2022.  Four of the bank acquisitions were by credit unions.  Of these, only one CU announced the deal terms.  In May 2022, DFCU Financial Credit Union announced the acquisition of First Citrus Bancorp, with $689M in assets.  The transaction was reported with a Price/Tangible Book of 210% and Price/Earnings multiple of 15.3, according to S&P Global Market Intelligence.

Following is a deal summary of the credit union acquisitions of banks and summary of all bank transactions: