Thursday, July 7, 2016

Merging CUs Shared Certain Negative Financial Characteristics

During a March 9th webinar, the National Credit Union Administration (NCUA) stated that the most common reason for credit unions merging was weak financial conditions.

According to NCUA, the agency studied over 400 credit union mergers during 2012 and 2013. NCUA found that merging credit unions shared certain negative financial characteristics.
  • About 47 percent of the merging credit unions had negative member growth for three consecutive years prior to merger.
  • About 26 percent of the merging credit unions were in prompt corrective action sometime during the three to four years prior to merger. 
  • Fifty-four percent of the merging credit unions had negative earnings for three consecutive prior years to merger. 
  • Fifty-three percent had declining net worth ratios for three consecutive years prior to merger.
These financial factors could help identify the universe of credit unions that are potential merger targets.

According to information from a NCUA spokesperson, at the end of 2015,
  • 266 credit unions reported declining membership each quarter between December 2012 and December 2015;
  • 208 credit unions had negative earnings for each quarter between December 2012 and December 2015; and
  • only 3 credit unions saw their net worth ratio fall every quarter between December 2012 and December 2015.
The NCUA spokesperson noted that 553 credit unions were subject to prompt corrective action (defined as net worth ratio below 7 percent) during that 3-year time period -- 171 credit unions in 2013, 172 credit unions in 2014, and 210 credit unions in 2015. However, this 553 credit union number probably involves the double or triple counting of the same institution.


  1. Marvin C. UmholtzJuly 7, 2016 at 9:14 PM

    Keith- This information is very disturbing. Credit unions should be merging for strategic reasons, not because their business model has gone to heck (and I don't mean Depresentative Denny Heck (D-WA). -- Marvin U. 07/07/17

    P.S. Check out GAO-16-622. the credit unions are now the GAO poster children for "tax expenditures"-- see page 7.

  2. Marvin:

    I saw the GAO study. I noticed that credit unions were specifically mentioned. GAO wants agencies to justify their tax expenditures. That should make the CU industry really nervous.

    I'm going to do a deep dive into this weekend.

  3. Keith, Interesting stats from NCUA. Have you run across any comparative data dives from the banking side?


    1. Gerry:

      I have not seen anything. But several years ago, FDIC held a conference on the state of community banks. The conference may have some data.



The content is provided for educational purposes only, with the understanding that neither the authors, contributors, nor the publishers of this site are engaged in rendering legal, accounting or other expert or professional services. If legal or other expert assistance is required, the services of a competent professional should be sought.

Comments appearing in response to articles appearing on this site do not necessarily reflect the views of the ABA. ABA makes no representations regarding the truth or accuracy of commentary or opinions that may be posted in response to the articles that appear on this website.

The inclusion herein of any link to a website, either in the text of an article or in a comment, does not denote any approval, sponsorship, or endorsement by the ABA, and ABA is not responsible for the content or opinions expressed on those linked websites or related commentary. This content is not licensed to third parties sites and is not affiliated with any third party site. Any reference to the author or this content on any third party site on the Internet is not authorized by the ABA.

It is the policy of the American Bankers Association to comply fully with all antitrust laws. Certain discussions should be considered off-limits, including those that contain competitively sensitive data such as price and cost information, or statements that could be construed as reflecting an attempt or desire to control or influence a particular market or markets. Future pricing or other prospective competitive information should never be shared.