NEW LONDON, Conn.–Eight more merger disclosure forms have been filed with NCUA, with credit unions citing not just the usual “more products and services” for why they need to combine, but also one CU reporting a deceased CEO, another that its manager is ill and 40% of staff have left, and another saying it chose its merger partner in part because “we like them.”
Just two of the credit unions reported they plan to return any of their net worth to members--one of those is paying a flat $20 per member, while another profitable credit union, even with capital north of 17%, said it couldn’t pay out funds due to several reasons, including what it said are potential loan losses related to COVID-19.
Two also disclosed merger-related compensation will be paid to management (including a deal that essentially rewards the former management for leaving).
CUToday.info has pledged to readers it will provide the most comprehensive review in the industry of merger-related disclosures being made to members.
CUToday.info’s earlier reports in 2022 on what’s being disclosed in CU mergers were reported Jan. 12, March 16, April 26, April 27, May 17, May 18 and June 8.
Below is the most recent update.
‘Best Use of Net Worth’
Merging Credit Union: New London Municipal Employees CU, New London, Conn.
Assets: $3.037 million
Members: 448
Founded: 1953
Acquiring Credit Union: Scient Credit Union, Groton, Conn.
Assets: $314.6 million
Members: 19,788
In its statement to members, the credit union said the board concluded Scient FCU offers “more products, services and access points…In addition, this merger is the highest and best use of New London Municipal Employees Credit Union members net worth related to strategic planning and business continuity.”
New London Municipal reported a net loss of $6,599 as of March 31.
With more than $575,000 in net worth, or a ratio of 18.8%, NLMECU said it will not be distributing any of its reserves to its 448 members, stating it is “unnecessary with Scient Federal Credit Union serving its members and will now offer a full range of banking products and services.”
Scient FCU reported $901,243 in net income as of the first quarter, with net worth of 9.03%.
A member vote is scheduled for July 25.
Long-Time CU Leader Passes Away
Merging Credit Union: Champaign County School Employees Credit Union, Champaign, Ill.
Assets: $16.6 million
Members: 1,245
Founded: 1934
Acquiring Credit Union: Illinois Educators Credit Union, Springfield, Ill.
Assets: $82.6 million
Members: 7,448
In its disclosure to members, Champaign County School Employees CU said, “We have been unable to find a replacement upon the passing of our long-time CEO, Penny Sergent. Without a leader, CCSECU has struggled to maintain profitability, keep up with new regulations and compliance needs. At our asset size it is difficult to provide products and services our members deserve.”
While no net worth distribution is planned, if the merger is approved CCSECU said the only merger-related compensation that is planned is that Loan Officer Melissa Benison, a 20-year employee of the credit union, will receive a 5% pay increase at Illinois Educators CU.
In its Q1 5300, Champaign County School Employees reported a $14,445 loss, with net worth of 7.71%. For the same quarter, Illinois Educators CU reported $222,802 in net income, with net worth of 9.73%.
A member vote is scheduled for July 28.
17% Net Worth, But No Return to Members
Merging Credit Union: Countryside FCU, East Syracuse, N.Y.
Assets: $166.6 million
Members: 4,802
Founded: 1941
Acquiring Credit Union: Northern Credit Union, Watertown, N.Y.
Assets: $442.7 million
Members: 36,394
In its disclosure to members, Countryside FCU cited more opportunities for employees, better pricing, improved products and services, enhanced convenience through technology and lower operating costs.
CFCU, which closed the first quarter with capital of 17.41%, said there will be no share distribution due to “one-time merger costs, termination fees, integration costs for core banking and other data systems,” and also due to the “continuing credit union’s extensive infrastructure and beneficial services and product offerings…,” as well as the “need for maintaining current net worth position due to the uncertainty of potential loan losses resulting from the current COVID-19 pandemic…”
Payments to Management
Countryside FCU also disclosed it will pay CEO Ben Gasser $357,000 as “compliance with the covenants in the Employment Agreement…equal to 200% of the executive’s annual base salary at the closing of the merger.”
In addition, VP-Commercial Lending Kenneth Jardin will be paid a $39,609 as the result of a retention bonus/pay increase at the merged CU, while SVP-CFO Andrea LaGrow will receive $30,589 for the same reasons.
While more than two-and-a-half times the size of Countryside FCU, Northern FCU reported $865,965 in net income, compared to CFCU’s $705,917. Northern FCU closed Q1 with capital of 8.03%.
$250 Payout if Merger is Approved
Merging Credit Union: allUS Credit Union, Salinas, Calif.
Assets: $52 million
Members: 3,929
Founded: 1950
Acquiring Credit Union: Pentagon FCU, McLean Va.
Assets: $35.3 billion
Members: 2.715 million
In its statement to members, allUS CU said, “in today's landscape of digital transformation coupled with evolving technology, regulatory compliance, and increasing cyber-criminal threats, our board of directors evaluated strategic possibilities to assure you, our member, will continue to receive the full range of products and services you deserve. To ensure continuity of operations while seeking to expand product offerings and improve services, we have been diligently searching to find alternatives. A merger with PenFed meets the full range of our objectives: growth of membership, expansion of product offerings, infusion of investment in IT cybersecurity, improved training, and enhanced community service.”
allUS said it will distribute a $250 special dividend (amounting to approximately $1 million) to each member if the merger is approved.
Merger-Related Compensation
In addition to better pay and benefits for employees, allUS said several members of its management team will receive merger-related compensation, including CEO Patrick Redo, Loan Manager Robin Ceralde, and Operations Manager Chantal Alcantar, each of whom will receive a three-year guarantee of employment.
“If termination of employment by either party occurs after 12 months from the merger completion date, each employee can receive a maximum of 24 months of their current annual salary as severance. After the 12th month of employment following the merger completion date and for each successive month, up to the 36th month of employment, one month of severance pay will be deducted from the total 24 months’ severance guarantee available to these three employees.”
The Specifics
Specifically, the disclosure states:
- Redo’s annual salary is $168,989.20; maximum one-time payout if employment is terminated by either party would be $337,958.40.
- Ceralde’s annual salary Is $68,577.60; maximum one-time payout if employment is terminated by either party would be $137,155.29
- Alcantar’s annual salary $54,059.20; maximum one-time payout if employment is terminated by either party would be $108,118.40.
The agreement calls for AllUS CU’s branch in Salinas, Calif. to remain open.
AllUS CU reported $107,290 in net income for the first quarter, and posted net worth of 13.46%. PenFed reported net income of $76.6 million and net worth of 9.09% as of the same date.
The member vote is scheduled for Aug. 1.
‘Most Importantly, We Like Them’
Merging Credit Union: Quad Cities Postal Credit Union, Moline, Ill.
Assets: $8.5 million
Members: 745
Founded: 1938
Acquiring Credit Union: Gas and Electric Employees CU, Rock Island, Ill.
Assets: $111 million
Members: 5,028
In one of the more personal disclosures to members related to mergers, Quad Cities Postal CU said, “by choosing to merge instead of being forced to merge by the state, we are able to move in the direction we want to move in and will be in our members’ best interest.
“As you all know we are a very small, private credit union. There are many perks to remaining small, the most important being the personal connections we have with each of you,” QCPCU continued. “There are no automated phone systems, no long lines, or delays in service. But being small also has its drawbacks. We are limited by our size in the types and amount of services, loans, and products we can offer. We have found that we can no longer compete in today's increasingly competitive and fast paced financial world without help.”
4 Reasons Cited
To that end, the CU’s board said it chose Gas & Electric Credit Union as its merger partner because:
- “Most importantly: We like them. We like how they run their operations. We like their employees. And we especially like how they treat their members.”
- “With an existing member base of over 5,500 accounts, they are able to offer products and services we cannot. And even with their larger size they still maintain the same level of customer service smaller credit unions are known for.”
- “This is not a huge corporate takeover. While Gas & Electric credit union has merged with smaller credit unions in the past, each time they were sought out as a merger partner. They have not actively approached nor attempted to buy out smaller institutions. We feel this speaks volumes to their business integrity.”
- “The merger proposal includes keeping our location open with existing employees…”
The merger calls for maintaining the current branch of Quad Cities Postal. The disclosure form indicates there will be no distribution of net worth nor any merger-related compensation paid to board members or management.
QCPCU reported net income of $1,898 in the first quarter, with net worth of 6.97%. Gas and Electric Credit Union posted net income of $71,627 in Q1, with net worth of 9.77%.
The member vote is scheduled for August 4.
$20 to Each Member
Merging Credit Union: City Trust FCU, Ft. Wayne, Ind.
Assets: $12.7 million
Members: 769
Founded: 1953
Acquiring Credit Union: Fire Police City County FCU, Ft. Wayne, Ind.
Assets: $170.9 million
Members: 10,945
In its statement to members, City Trust said it is seeking to merge because it would be “in the best interests of members because it would be advantageous to all members affected by this merger in the form of value, convenience, and quality of products and services.”
City Trust said if the merger is approved it plans to distribute $20 to each primary member, but also noted it will eventually close its main office.
The disclosure form indicates there will be no distribution of net worth nor any merger-related compensation paid to board members or management.
City Trust said it had net income of $6,692 in Q1, with net worth of 10.82%. Fire Police City County CU had $434,914 in net income as of the same date, with net worth of 9.25%.
A member vote is set for Aug. 8.
Manager ill, 40% of Employees Left
Merging Credit Union: Peabody Municipal FCU, Peabody, Mass.
Assets: $34.6 million
Members: 1,968
Founded: 1961
Acquiring Credit Union: Energy Credit Union, West Roxbury, Mass.
Assets: $111.7 million
Members: 4,147
In its statement to members, Peabody Municipal said it lost 40% of its employees in January of 2022, and that its CEO/manager is facing ailing health requiring strenuous medical treatments and the credit union does not have a succession plan. Aside from a partner that can provide service continuity to the membership, the credit union is also looking for the ability to offer its members (sic) robust services such as real estate lending and or IRA.
While no distribution of capital to members is planned, three employees will receive merger-related compensation, according to the disclosure forms, including:
- CEO Kevin Donovan. “In order to maintain current staffing past merger, a stay-on benefit payable six months after merger date will be rewarded” amounting to $19,873.35
- For similar reasons, MSR Mary Beth Mallia will receive $10,382.78
- For similar reasons, Teller Anne Marie Stevens will receive $8,745.75.
Peabody Municipal posted $5,217 in first quarter net income, with net worth of 9.09%. Energy Credit Union reported $134,930 in net income and net worth of 14.28% as of the same date.
A member vote is scheduled for Aug. 10.
Feeling Pressure on Margins
Merging Credit Union: San Tan Credit Union, Sandler, Ariz.
Assets: $10.1 million
Members: 1,033
Founded: 1971
Acquiring Credit Union: First Credit Union, Chandler, Ariz.
Assets: $683.1 million
Members: 41,556
“The merger is essential for STCU members to continue to receive financial services in its service area,” San Tan CU said in its disclosure to members. “STCU is under continued margin pressure from increased operational and compliance costs, making it difficult to compete with much larger institutions in the market. The proposed merger will benefit their respective memberships by achieving operational cost savings and improving the operational and financial strength of the continuing credit union, ultimately enhancing member value.”
The disclosure form indicates there will be no distribution of net worth nor any merger-related compensation paid to board members or management.
San Tan CU posted a loss of $29,965 in the first quarter, with net worth of 6.12%. First Credit Union had net income of $840,245, with net worth of 8.55% as of the same date.
A member vote is to be held Sept. 17.
Additional Technology to be Offered
Merging Credit Union: Western Illinois Credit Union, Macomb, Ill.
Assets: $36.5 million
Members: 2,872
Founded: 1959
Acquiring Credit Union: Credit Union 1, Rantoul, Ill.
Assets: $1.237 billion
Members: 80,369
In its member notice, Western Illinois CU said it needs to merge because Credit Union 1 “operates the technology and systems that align with our member needs. Their internal core values give us confidence our membership will experience a much-needed upgrade in quality of service that we are unable to provide in this current environment. We believe a synergy exists between the two credit unions and this partnership will benefit all involved.”
WICU said no share adjustment is being paid because members will have access to “a host of updated services and options” following the merger.
There will also be no merger-related compensation paid to anyone, WICU added.
For Q1, Western Illinois CU had a $19,040 loss, with net worth of 7.35%. Credit Union 1 reported $1.378 million in net income with net worth of 8.91%.
WICU members are to vote on the merger Aug. 18.
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