Credit Union Merger Approvals 1Q 2022

NCUA approved 41 mergers in Q1 of 2022 which increased from 40 last quarter. The combined assets of merged credit unions is $5.5B, which compares to $1.5B last quarter and $1.7B in Q1 2021.

The mean and median assets of merged credit unions are $134.3M and $17.2M, 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 are eight acquisitions of credit unions with assets exceeding $100 million this quarter.  The largest acquisitions are:

• Capital Communications Credit Union, located in Albany, NY, which is being merged into State Employees CU ($5.4B) in Albany, NY. Capital Communications has $2.7B in assets, 9.6% net worth ratio, 0.68% delinquent loan ratio, and 1.74% ROA.
• Global Credit Union, based in Spokane, WA, which is being merged into Alaska USA FCU ($10.7B) in Anchorage, AK. Global has $606M in assets, 8.5% net worth ratio, 0.43% delinquent loan ratio, and 0.89% ROA.

CREDIT UNION MERGER STATS

The median size of acquiring credit unions is $478M.  There are 13 credit union acquirers with assets exceeding $1 billion and 6 credit union acquirers with assets below $100M.

With $10.7 billion in assets, Alaska USA FCU is the largest acquiring credit union in Q3.

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

• State Employees ($5.4B)
• Genisys ($3.9B)
• American Heritage ($3.7B)
• Affinity Plus ($3.6B)
• Georgia’s Own ($3.4B)
• Fox Communities ($2.4B)
• Financial Partners ($1.9B)
• Self-Help ($1.8B)
• Horizon ($1.8B)

The acquired credit unions on average represent 10.8% the of the assets of the acquiring credit unions.  The nearest merger of equals is:

• People’s Trust CU ($510M) merging into First Service CU ($848M), 60% acquiree/acquirer ratio

There are 2 credit unions with less than $1 million in assets being acquired. The smallest credit union merger is St. Pauls CU based in Philadelphia, PA with $125,000 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 10.7%. There are 7 credit unions that have net worth ratios below 7.0%, which is considered undercapitalized.

The delinquent loans-to-total loans ratio averages 1.14%.  Nineteen (19) of the 41 merging credit unions reported negative earnings year to date.  The mean return-on-assets (ROA) was -0.42% and median 0.09% through year end 2021.

Below is a chart of the NCUA merger approvals for Q1 2022:

Credit Union Acquisitions of Banks

Bank consolidation was at approximately the same pace as credit union mergers.  There was a total of 48 bank acquisitions announced in the first quarter of 2022.  Five of the bank acquisitions were by credit unions.  Of these only one CU announced the deal terms.  In March 2022, Arizona Federal Credit Union announced the acquisition of Horizon Community Bank, with $539M in assets and 6 branches.  The transaction was reported with a Price/Tangible Book of 210% and Price/Earnings multiple of 15.4, according to S&P Global Market Intelligence.

Following is a deal summary of the credit union acquisitions of banks: