Characteristics of CU Mergers

June 11, 2010

The National Credit Union Administration identified 12,485 credit union mergers during 1971-2008, or 2.3% of credit unions per year, according to "Characteristics of Credit Union Mergers," a Filene Research Institute report.

This accounts for most of the reduction in the number of credit unions from its peak of 23,866 in 1969 to 8,147 in 2008. More than one-third of the credit unions in operation in 2008 participated in at least one merger from 1971-2008. 

Other Filene Research findings:

* During 1984-2008, credit union mergers transferred members and assets from institutions that, on average, performed less well (the targets) to other institutions that, on average, performed far better (the acquirers).

* Targets' assets totaled $37.3 billion during 1984-2008. Targets held a very small fraction of assets in federally insured credit unions—0.39% per year, much smaller than their acquirers, which held 10.27% per year.

* While the overwhelming majority of targets were tiny or very small during 1984-2008, 20.5% of targets' assets were concentrated in just 47 medium-sized targets (such as $100 million to $1 billion in assets). Few targets had acquirers that were more than $1 billion in assets.

* Across asset sizes, acquirers have higher noninterest expenses per assets than similarly-sized nonmerging federally insured credit unions. Some acquirers, smaller ones in particular, seem to use mergers as a key tool to jump-start growth and lower their average cost of operations.

* While most targets were much smaller than their acquirers during 1984-2008, 21% of targets' assets were concentrated in 437 mergers of equals, which we define as mergers where the target was at least half as large as the acquirer. While mergers of equals among credit unions larger than $100 million are now becoming more common, they were relatively rare in the analysis period.

* Voluntary mergers (those that didn't receive formal assistance from NCUA) have been the main mechanism for credit union exits, totaling 8,209 targets, or 2.81% of federally insured credit unions annually during 1984-2008.