Wednesday, September 14, 2011

Credit Union Mergers

A recent Federal Reserve Bank of San Francisco's Economic Letters on credit union mergers concluded that credit union mergers have shifted from, on average, only benefiting merger targets to also benefiting acquirers to some extent.

The paper looks at 9,412 credit union mergers from 1984 to 2009. The paper put credit union mergers into three categories -- absorptions, in which targets had less than 10% of the acquirer’s assets; acquisitions, in which targets had 10–50% of the acquirer’s assets; and mergers of equals, in which targets had more than half of the acquirer’s assets.

The study found that absorptions accounted for 69% of targets, but only 33% of target assets; acquisitions accounted for 25% of targets and 40% of target assets; and mergers of equals accounted for 6% of targets and 22% of target assets.

The study found that "in the first year after mergers, aggregate noninterest expenses fell by 0.02 percentage point in absorptions, 0.13 in acquisitions, and 0.20 in mergers of equals."

The study also found that five years after a merger of equals the cost savings had been completely dissipated, while acquisitions had retained a larger portion, if not all, of their cost savings.

Read the article.

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