Credit Union Mergers – May 2016

Mergers approvals were down by half in May.  NCUA approved 10 mergers in May 2016 which are down from 20 the previous month.

The number of mergers are down and the combined assets of merged credit unions are also down nearly $129 million compared to last month.  For the month of May, the total merged assets are $236 million, which is down significantly compared to last year’s $787 million. That’s a difference of $571 million. The mean and median assets of merged credit unions are up $21.6 million and $10.3 million respectively.  In contrast, last month the mean assets were less totaling $17.3 million and that was with double the number of mergers.

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Large Credit Union Mergers

There were no acquisitions of credit unions with assets exceeding $100 million this month.

The largest merger was San Antonio, TX based Alamo Credit Union ($45M) merging into Pentagon Credit Union ($20B) headquartered in Alexandria, VA.  Alamo CU is poorly capitalized (6.5% Net Worth), has moderate delinquency (0.71%) and is losing money (-1.69% ROA).  “Poor Financial Condition” was given as the reason for the merger.

Credit Union Merger Stats

The median size of acquiring credit unions is $ 144 million.  There are 2 credit union acquirers with assets exceeding $1 billion.

With $19.9 billion in assets Pentagon CU, was the largest acquiring credit union in May.

Other credit union with assets exceeding $1 billion included:

• Coastal CU, Raleigh, NC ($2.6B)

The acquired credit unions on average represent 1% of the assets of the acquiring credit unions.

There was one merger of equals with between Lamar, CO based Fellowship Credit Union ($12M) and Las Animas, CO based Arkansas Valley Credit Union ($12M)

Only one credit union with less than $1 million in assets is being acquired.  The smallest credit union is Delaware River Employees Credit Union based in Bridgeport, NJ with $616,000 in assets, which is being acquired by $21 million in assets Fort Billings Credit Union headquartered in Paulsboro, NJ.

Reasons for Credit Union Mergers

When seeking regulatory approval credit unions are required to site the reason for the merger.  Of the 10 mergers in May, the following reasons were given:

• Expanded services: 7
• Poor financial condition: 2
• Loss/declining field of membership: 1

Financial Performance of Acquired Credit Unions

The median net worth ratio of the merging credit unions is 8.7%. Two credit unions have a net worth ratio below 7.0% and are considered under-capitalized.

The delinquent loans-to-total loans ratio averages 2.1%.

Four of the 10 of the merging credit unions reported positive earnings year to date.  The mean return-on-assets (ROA) is -1.1% and median -0.7% for May of 2016.

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