A Look at Latest in Merger Activity

By Glenn Christensen

Christensen Glenn

NCUA approved 53 mergers in the fourth quarter of 2018, an increase from the 52 in the prior quarter.  The combined assets of merged credit unions was $1.5 billion, as compared to the $2.1 billion in the prior quarter and $1 billion in the same quarter one year earlier.

The mean and median assets of merged credit unions was $29 million and $9 million, respectively.

There were two acquisitions of a credit unions with assets exceeding $100 million this month. The largest was the $383-million Progressive Credit Union, a taxi medallion-lending CU in New York City that was acquired by Pentagon FCU in McClean, Va.  As CUToday.info reported, Progressive has low capital (-1.58% net worth), high delinquency (26%), and was unprofitable (-25.87%).

Credit Union Merger Stats

The median size of acquiring credit unions in Q4 was $280 million.  There were three credit union acquirers with assets exceeding $2 billion, including the $24-billion PenFed, the largest CU involved in a merger.

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

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

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

The nearest merger of equals was the $18-million Fox Valley Credit Union in Aurora, Ill. with the $21-million Allsteel Credit Union in Oswego, Ill.

There were two credit unions with less than $1 million in assets that were acquired.  The smallest credit union was Star Madison based Philadelphia, which had just $32,650 in assets. It was acquired by the $3.1 billion Summit Credit Union in Madison, Wis

Reasons For 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 Condition of Acquired Credit Unions

The median net worth ratio of the merging credit unions was 12.16%. There were six credit unions that had a net worth ratio below 7.0%, which is considered undercapitalized. The worst ratio was reported by Progressive Credit Union, which had a -1.58% net worth ratio.

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

Twenty-three 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.

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

Christensen Merger Graphic
Section: Standard
Word Count: 689
Copyright Holder: CUToday.info
Copyright Year: 2019
Is Based On:
URL: https://www.cutoday.info/THE-tude/A-Look-at-Latest-in-Merger-Activity