The NCUA approved 242 credit union mergers through the first nine months of 2006 versus 208 mergers through the same period in 2005. Total merged assets increased to $5.3 billion from $2.8 billion through the first three quarters in 2005, as the average merged credit union had $21.7 million in assets versus $13.7 million the year before. In 2006, there have been on average 26.9 approved mergers each month, with June reporting the highest activity with 38 mergers and April reporting the lowest activity with 15 mergers. If the current pace is maintained, the NCUA will approve another 80 mergers this calendar year to reach a total of 322.
However, the State Farm merger deal approved by the NCUA in June 2006 inflates the overall merger data trends. The 12 State Farm credit unions decided to undergo a corporate restructuring and consolidate under the State Farm Great Lakes name to form an institution that will have approximately $2.9 billion in assets. Once the merger is finalized, the State Farm Great Lakes Credit Union will break into the top 25 credit unions by asset size. The 11 State Farm credit unions that are being merged away reported having on average $208.2 million in assets, thereby significantly increasing the total and average merged assets in the first nine months of the year.
Here are the quick stats on the approved mergers through the first three quarters of 2006:
Which states had the most mergers?
- Eight states had 10 or more mergers: New York (22), Ohio (22), Pennsylvania (18), Michigan (15), California (14), Illinois (10), Massachusetts (10), and Texas (10).
Which credit unions are being merged?
- Merged credit unions over $50M: 26 so far in 2006 versus 16 in all of 2005.
- Merged credit unions between $20M – $50M: 14 so far in 2006 versus 21 in all of 2005.
- Merged credit unions between $10M – $20M: 34 so far in 2006 versus 23 in all of 2005.
- Merged credit unions less than $10M: 168 so far in 2006 versus 241 in all of 2005.
Which credit unions are acquiring others?
- Continuing credit unions over $1B: 11 so far in 2006
- Continuing credit unions between $250M – $1B: 66 so far in 2006
- Continuing credit unions between $100M – $250M: 58 so far in 2006
- Continuing credit unions between $50M – $100M: 26 so far in 2006
- Continuing credit unions less than $50M: 81 so far in 2006
Merged credit unions as a percentage of the industry?
- 3.65 percent (projected) in 2006 versus 3.28 percent in CY 2005.
While expanded services, the inability to obtain executives, a declining field of membership, and poor financial condition are the primary reasons reported to the NCUA when credit unions file for a merger, there are also strategic benefits to seek a merger of equals. New synergies may be measured in terms of product mixes, balance sheet compositions, corporate philosophies, and overall financial performance. Also, a combined institution would enjoy an economy of scale advantage that could make it more competitive in its newly created field of membership. Several institutions are finding it difficult to compete with margin pressures, a rising cost of funds, and low member growth. If the new synergies result in a better member experience, a merger may be an option to consider.
To read more about recent mergers and find out more about the state of the credit union industry, turn to Callahan & Associates just released 2007 Credit Union Directory.