In a recent press release regarding the merger of two credit unions in which a smaller credit union merged into a much larger credit union, the leadership of the smaller credit union referenced a familiar merger catalyst:
“…challenges related to the economy and increasing regulations.”
For this week’s HealthScore Chart of the Week, which is embedded below, we plotted the HealthScores of the merging credit unions to gauge how much each was impacted by the ever-changing economic and regulatory environment. As a reminder, HealthScore factors include net worth, earnings, operating expenses, efficiency, membership and asset growth, delinquencies and charge offs, and member deposit and loan relationships.
Clearly the merging credit union suffered steep declines in overall health from the start of the financial crisis until the day they decided to merge, however one could question why they waited so long to make their decision. Neither economic nor regulatory pressures were ever predicted to ease up during the entire period from 2007 onward. Perhaps they should have made the decision much earlier, in 2011 for example, when their health took a nosedive and their net worth ratio dropped below 7% (not shown).
In any case, the choice they made with regard to a merger partner looks like a good one. The surviving credit union is quite healthy in terms of our HealthScore model, especially relative to the industry average score of 2.415 (as of 12/31/13). They also seem to have weathered economic and regulatory pressures very well. Undoubtedly the members of the merged credit union will benefit from a stronger credit union capable of consistent organizational improvement.
Interested in learning more about where your credit union stands in relation to Glatt Consulting’s Credit Union Industry HealthScore? Purchase a custom score report for your credit union. You may also want to learn more about our approach to credit union strategy consulting.