A Look at Q2's Merger Activity

By Glenn Christensen

Christensen Glenn

NCUA approved 31 mergers in Q2 of 2019, which was an increase over the 28 of the prior quarter. The combined assets of merged credit unions was $2.1 billion, which compares to $1.3 billion in Q1 and $800 million during the same quarter in 2018.  

The mean and median assets of merged credit unions were $66 million and $8.2 million, respectively.

There were three acquisitions of a credit unions with assets exceeding $100 million during the second quarter, including:

  • Inspirus CU, Seattle, which merged into the $2.1-billion GESA CU in Richland, WA. Inspirus had $1.3 billion in assets, a 10.5% net worth ratio, a 0.35% delinquent loan ratio, and 1.14% ROA.  
  • Deer Valley CU, Phoenix, which merged into Canyon State CU, also headquartered in Phoenix.  Deer Valley CU is the larger of the two CUs with $248 million in assets, and had a 8.8% net worth ratio, 0.5% delinquency ratio, and 0.78% ROA.  In contrast, Canyon State CU had assets of $193 million, a 9.8% net worth ratio, a 0.6% delinquency, and 0.18% ROA.
  • Partnership CU, Washington, D.C., which merged into NASA FCU in Upper Marlboro, Md. Partnership had strong cap (9.9% net worth), low delinquency (0.23%), and was profitable (0.63%). 

CU Merger Stats

The median size of acquiring credit unions was $155 million.  There were five credit union acquirers with assets exceeding $1 billion. With $2.5 billion in assets, NASA FCU was the largest acquiring credit union during the second quarter.

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

  • Community Choice ($1.1 billion)
  • Educational Systems ($1 billion)
  • Spire ($1.1 billion)
  • GESA ($2.1 billion)

The acquired credit unions on average represented 15% the of the assets of the acquiring credit unions.

The nearest merger of equals were: 

  • Deer Valley CU ($248 million) merging into Canyon State CU ($193.2 million), 128% acquiree/acquirer ratio
  • Metro North CU in Michigan ($46 million) merging into Birmingham-Bloomfield CU in Michigan ($69 million), 67% acquiree/acquirer ratio
  • Inspirus CU ($1.3 billion) merging into GESA CU ($2.1 billion), 63% acquiree/acquirer ratio

There were six credit unions with less than $1 million in assets that were acquired. The smallest credit union merger was Cosmopolitan FCU Chicago with $44,000 in assets at year-end 2018, and whose assets and members had declined to $26,000 and 21, respectively, as of June 2019.  

Reasons For CU Mergers

When seeking regulatory approval credit unions are required to cite the reason for the merger.  Of the 31 mergers in Q2, the following reasons were given:

  • Expanded Services: 26
  • Poor Financial Condition: 1
  • Inability to Obtain Officials: 3
  • Lack of Growth: 1
  • Loss/Declining Field of Membership: 1

Financial Performance of Acquired Credit Unions

The median net worth ratio of the merging credit unions was 12.75%. There was one credit union that had net worth ratio below 7.0%, which is considered undercapitalized, and that was Healthcare 1st CU at 6.86% net worth.

The delinquent loans-to-total loans ratio averaged 6.17%

Seventeen of the 31 merging credit unions reported negative earnings year to date.  The mean return-on-assets (ROA) was -0.98% and median -0.13% for Q2 of 2019. 

Below is a chart of the NCUA merger approvals for Q2 2019.

Glenn Christensen is with CEO Advisory Group. For info: www.ceoadvisory.com.

Christensen Mergers Chart
Section: Standard
Word Count: 802
Copyright Holder: CUToday.info
Copyright Year: 2019
Is Based On:
URL: http://www.cutoday.info/THE-tude/A-Look-at-Q2-s-Merger-Activity