CHARLOTTESVILLE, Va. Too many credit union mergers are the result of a “misalignment or absence of intelligent incentives,” according to one new analysis that goes on to suggest that credit unions are playing a “dangerous game trying to ride out troubles rather than focusing on tactical acquisitions.”
The analysis, released by SNL Research here, suggests the credit union consolidation, especially among CUs with assets of $500 million or less, are “motivated more by financial distress and avoiding failure than strategy and long-term planning. The analysis, however, is primarily based on interviews with a number of subjects within and outside credit unions, including Henry Wirz of SAFE Credit Union in North Highlands, Calif., and Peter Duffy, managing director at Sandler O’Neill, New York.
Wirz told SNL his $1.9-billion CU would like to grow to between $3 billion and $5 billion in assets, where it feels it would have the greatest economies of scale, but that it has had difficulty finding a similarly sized CU seeking to merge. Those mergers it has completed, Wirz says in the analysis, were the result of being contacted by the regulator to take in a distressed CU.
As Credit Union Journal has previously reported, the SNL analysis found most merger activity among CUs in that $500 million in assets or less category.
Charles McQueen, president of McQueen Financial Advisors in Royal Oak, Mich., told SNL his credit union merger valuation business for the first quarter was double 2012’s pace. He said most surviving credit unions in a potential merger have more than $100 million in assets, while the merged institutions tend to have between $20 million and $100 million.
