NCUA Approved Credit Union Mergers – April 2015

For the third month in a row the number of credit union mergers is down compared to last year.  The NCUA approved 25 mergers in April 2015 which is down from the 32 mergers in April of last year.  There were twice as many credit union acquisitions this month compared the the 12 of last month (March).

While the number of CU mergers was smaller the combined assets was larger.  Total assets of the merged credit unions is nearly $1.5 billion nearly triple the amount from last year ($593 million).  The mean and median assets of merged credit unions are $59.6 million and $12.2 million respectively.  In contrast, last month the mean assets were $18 million.

Large Credit Union Mergers

There were four mergers with credit unions exceeding $100 million in assets.

The largest merger was Premier Members Credit Union’s ($484M) merger into the smaller ($329M) Boulder Valley CU.  Both these credit unions showed strong financials.  Boulder Valley will be the surviving charter and Premier Members will be the surviving name.  Premier Valley’s website explains the reason for the merger: “The credit union world is becoming increasingly competitive and consolidated. This is a proactive step by two financially sound institutions to capitalize on their strengths, and position the new organization to move into the future”.  The credit unions created a YouTube video celebrating the history of both organizations.

Camarillo, CA based Pacific Oaks Federal Credit Union ($300M) is merging into Premier America Credit Union ($1.7B) headquartered in Chatsworth, CA. The reason for the merger according the Pacific Oaks website: “Very simply, we want to bring members more value from their credit union.  Unlike bank mergers that are designed to make money for stockholders, this exciting partnership is solely to benefit you.  It would take us decades to grow to the point where we could offer members the branches, products, services, technologies and great rates this partnership will immediately bring”.

Lake State Credit Union ($190M) based in Moose Lake, MN was approved to merge into Cloquet, MN based Members Cooperative Credit Union ($419M).  Lake State was profitable, 0.4% ROA, and well capitalized with a net worth to asset ratio of 10.3%.  According to Tim Smith, President/CEO of Lake State CU “joining with MCCU will allow us to serve our members better, which is the cornerstone of the cooperative mission.”

Boston-based Industrial Credit Union ($170M) is merging into Worchester-based Webster First Federal Credit Union ($642M).  Industrial was profitable, 0.4% ROA and well capitalized 10.3%.  ICU President/CEO Roy Campana Stated: “I’m proud of the success ICU has achieved during the 40+ years that I have been here and I want to protect its future.  I felt the best benefit to the members, staff and community would come with a merger. Bringing Webster First Federal Credit Union to Boston is an absolute win-win for all.  They are technologically on point, financially strong and intellectually and professionally sophisticated.”

Credit Union Merger Stats

The median size of acquiring credit unions is $532 million.  There were seven credit union acquirers with assets exceeding $1 billion.  With $2.6 billion in assets Veridian Credit Union, based in Waterloo, IA was the largest acquiring credit union in April merging $7 million Midwest Federal Employees Credit Union.  Lake Jackson, Texas based Texas Dow Employees Credit Union, which is merging Dallas-based TCC Credit Union with $33 million in assets, was the second largest acquirer with $2.4 billion in assets.

The acquired credit unions on average represented only 8% of the assets of the acquiring credit unions.  There was one merger of equals between Boulder Valley Credit Union and Premier Members Credit Union.

Three credit unions with less than $1 million in assets are being acquired.  The smallest credit union is Mout Zion A.M.E. Church CU based in Trenton, NJ with $56,000 in assets, which is being acquired by $2.5 million Servco CU.

Reasons for Credit Union Mergers

“Expanded services” continues to be the primary factor motivating these mergers.  “Poor financial condition” was the reason for the merger sited by two of the credit unions. “Lack of sponsor support” was also cited as a reason for the merger.

Financial Performance of Acquired Credit Unions

The median net worth ratio of the merging credit unions is 11.6%.  Five credit unions have net worth ratios below 7.0%.

The delinquent loans-to-total loans ratio averages 2.7%, which is primarily attributed to two credit unions with delinquency ratios exceeding 10% of loans.  This includes the 33% delinquency ratio reported by Mount Zion A.M.E. Church CU.

Half of the credit unions reported positive earnings year to date.  Despite this number of credit unions reporting positive earnings the mean return-on-assets (ROA) is -1.0% through March of this year.

Below is a chart of the NCUA merger approvals for April 2015: