C.U. Assets Grow at Breakneck Speed

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The NCUA released its second quarter state-by-state Credit Union findings on Tuesday (9/15) proving that, yes, things are as crazy as they seem. The median asset growth at federally-insured credit unions during the 12 months ending June 30, 2020 was a whopping 10.0%. For comparison, the previous year 's asset growth was 1.7%, which is much more typical.

The states with the highest growth were Vermont (15.3%) and Nevada (15.2%). Not surprising, since both states have relatively few credit unions per capita. The two states with the lowest median growth rate were Louisiana and New Jersey (each up 6.1%).

For the most part, those assets are NOT in the form of loans. Industry loan growth was a paltry 0.2% during the most recent period compared to 4.6% a year ago. And, as we reported last week, most of the growth was from people taking advantage of low interest rates, particularly on single family homes.

Of course, there are exceptions to every rule. Three-Star Empire Financial FCU, Jackson, NJ, is one such exception. Established in 1976 as Queens Cluster FCU, the credit union (wisely, we think) decided to broaden its appeal with a new name in 2018. It remains a niche credit union with just two part-time employees. However, in the past year, it has grown its number of share accounts by 14.7% and, more importantly, it has grown its loan portfolio by several-fold.

Empire Financial credits a grant from the New York Credit Union Foundation for much of this growth. All federally-insured credit unions that  are large enough to be rated by Bauer (assets greater than $1.5 million) that experienced  year-over-year asset growth exceeding one-third of their original size based on June 30, 2020 data, can be found on page 7. Empire Financial tops the list with over 300%. (Interestingly, prior to this quarter, Empire Financial was deemed too small to be rated.)

Not all of the credit unions took the same route to grow. About half way down the list you will find 5-Star Verve, a Credit Union, out of Oshkosh, WI. Originally chartered in 1938 as Wisconsin Axle Credit Union, Verve has a very acquisitive history. Since 1982, it has acquired

eight institutions. Up until this year, all acquisitions were of credit unions. Verve announced plans in 2019 to acquire South Central Bank, N.A., Chicago, IL and its $296 million in assets. The deal was finalized in January, just two months after another such  deal was completed.

While it took Verve decades to dip its toe in the acquisition pool, 5-Star MidFlorida Credit Union, Lakeland FL was acquiring almost as soon as came out of de novo status. With over a dozen acquisitions under its belt from 1984 through 2017, no one batted an eyelash. Then, in 2019 MidFlorida announced it would make its largest acquisition to date-Community Bank & Trust Bank of Ocala, FL and the Florida branches of First American Bank of Iowa.

While there was plenty of controversy surrounding these transactions, both are now completed. MidFlorida now has branches in some of Florida's most lucrative and desirable counties. If it keeps it up, what started off as MidFlorida School FCU might have to change its name again-to All Florida Credit Union.

Florida does seem to be a hotbed for these (credit union buying bank) transactions. But it's happening all over the country. 5-Star Three Rivers FCU, Ft. Wayne, IN is not the only Indiana Credit Union on the bank hunt, but it is the only one that made page 7.

On June 1, 2020, even in the midst of a COVID slowdown, Three Rivers FCU closed on its purchase of West End Bank, Richmond, IN with its nearly $300 million in assets.

COVID has had an impact on merger and acquisition activity (as with everything else) but it too, has helped to boost both assets and share deposits, at least temporarily.

New, broader Field of Membership (FOM) and Chartering Provisions for Federal Credit Unions (Federal Register 9/14/20) will likely take up the slack. For example, 4-Star Palisades FCU, Pearl River, NY will now be allowed to expand its FOM outside of Rockland County and into other New York and New Jersey counties. We'll look for them on next year's list.

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