WALTHAM, Mass.–Here is part II of the newest review by CUToday.info of the latest plans filed with NCUA for mergers and the disclosure statements required to be provided to members.
As noted in Part I, the latest analysis found among other things:
- Two billion-dollar CUs saying they are too small to compete
- A higher-than-usual number of CUs saying they can’t find new managers (one admits to a lack of succession planning)
- One CU that says it lacks a permanent home
- One CU saying members should vote for the merger because it is basically already under way
- Several CUs announcing net worth distributions (and one CU with capital north of 30% not doing so)
- A couple of credit unions approaching 100 years in operation that will be shuttering if the mergers are approved
Below is Part II. Part I can be found here.
2 ‘Relatively Small’ Billion-Dollar CUs Seeking to Combine
Merging Credit Union: RTN FCU, Waltham, Mass.
Assets: $1.032 billion
Members: 40,140
Year Chartered: 1987
Date of Member Vote: March 30
Acquiring Credit Union: Merrimack Valley CU, Lawrence, Mass.
Assets: $1.354 billion
Members: 75,795
In its member notice, RTN stated, “Both RTN FCU and MVCU are, measured in financial terms, relatively small in comparison to competing financial institutions. RTN FCU’s modest resources limit its ability to invest in the technology and other services that members increasingly demand. Combining FTN FCU and MVCU will deliver to our members a greater level of customer service through a larger branch network and a broader array of better products and services, such as enhanced online banking, including online account opening, a real-time video branch appointment app, free credit counseling services and a larger menu of loan products that include checking accounts with TM surcharge reimbursements, Mass Housing, FHA and VA mortgage loans, and rewards checking accounts with higher yielding interest and debit card cash-back options.”
RTN said all staff will be retained and no branches will close. The two credit unions are approximately 33 miles apart.
No Adjustment to Shares ‘Warranted’
RTN FCU told members there would be no share distribution because “RTN FCU would not be able to obtain sufficient growth on a standalone basis to project a valuation that warrants any adjustment in shares.”
RTN FCU posted $3.589 million in net income and net worth of 10.59% as of year-end 2022. Merrimack Valley reported $6.654 million in net income and capital of 8.68%.
COVID-19 Cited As One Reason for No Member Payout
Merging Credit Union: Powerco FCU, Atlanta
Assets: $194.5 million
Members: 14,793
Year Chartered: 1935
Date of Member Vote: March 30
Acquiring Credit Union: APCO Employees CU, Birmingham, Ala.
Assets: $3.42 billion
Members: 73,080
The board of Powerco FCU said the merger would benefit members by offering better pricing and services, additional products and enhanced convenience, as well as lower operating costs. “By joining together, Powerco FCU and APCO Employees CU will retain their members-first philosophy and be better positioned to serve members into the future,” the credit union said.
Powerco FCU said there would be no net worth distribution because the two CUs have similar ratios. “In addition, once all one-time merger costs (including early contract termination fees, integration costs for core banking and other data systems, and write-downs of fixed assets and other assets to be retired) are accounted for, the continuing credit unions extensive infrastructure and beneficial services and product offerings that will be available to Powerco Federal Credit Union members are taken into consideration, and the need for maintaining current net worth position due to the uncertainty of potential loan losses resulting from the current COVID-19 pandemic the difference in the credit union's probable asset share ratios are negligible.”
Powerco FCU reported $969,015 in net income for 2022, with capital of 12.98%. APCO Employees posted $26,204,384 in net income and 12.91% capital as of the same date.
Larger ‘Scale’ is Cited
Merging Credit Union: Commonwealth Utilities FCU, Marion, Mass.
Assets: $50.9 million
Members: 1,612
Year Chartered: 1926
Date of Member Vote: March 31
Acquiring Credit Union: Taunton FCU, Taunton, Mass.
Assets: $276.9 million
Members: 17,034
“In evaluating strategic alternatives we have determined that a merger with a credit union of larger scope, scale and similar culture with (a) commitment to member value is the answer,” the CUFCU board told members. “A larger scale operation will be more efficient, while allowing us to provide more resources to support our membership’s current and future needs, as well as ensure the safety and soundness of your private data and accounts.”
Commonwealth Utilities FCU posted $398,750 in net income for 2022, with net worth of 14.87% (it did not indicate there would be any net worth distribution). Taunton FCU had $2.069 million in net income, and closed the year with 10.47% capital.
A ‘Challenging Landscape’
Merging Credit Union: Kemba Peoria CU, Peoria, Ill.
Assets: $12.65 million
Members: 1,520
Year Chartered: 1934
Date of Member Vote: April 11
Acquiring Credit Union: Gale Credit Union, Galesburg, Ill.
Assets: $39.1 million
Members: 3,678
In its statement to members, Kemba Peoria CU said, “In a rapidly changing and challenging financial landscape our shared resources will allow the combined credit union to be stronger and will allow us to enhance product and service offerings and member convenience through better technology, competitive deposit rates, fees and loan terms, in addition to offering more locations.”
Kemba CU said it will be able to nominate three board members to join the Gale CU board, “provided that we end with an odd number of directors.”
Joy Skold, manager of Kemba Peoria, will be vice president of the combined credit union, if approved, according to the credit union.
Kemba Peoria finished 2022 with $69,296 in net income and capital of 11.01%. Gale Credit Union reported $382,648 in net income, with capital of 12.43% as of the same date.
CEO Plans to Retire and Staff Pulled in ‘Various Directions’
Merging Credit Union: Vermillion FCU, Vermillion, S.D.
Assets: $28.7 million
Members: 2,818
Year Chartered: 1959
Date of Member Vote: March 19
Acquiring Credit Union: Voyage FCU, Sioux Falls, S.D.
Assets: $181.5 million
Members: 16,795
Vermilion FCU’s board said the CU needs to merge because the CEO is planning to retire at the end of 2023 and it has “served as a challenge to find a replacement…” The two CUs also are well operated, financially sound and share a common service culture, VFCU said.
“Vermillion FCU has a small staff, which tends to pull the team in various directions,” the statement to members continued. “Merging with Voyage FCU will allow the Vermillion FCU staff to focus more of their time on the member experience and less on operational functions.”
VFCU also cited expanded services a merger would provide.
According to its disclosure form, Vermillion FCU CEO Janet Mount will receive merger-related compensation that includes a one-time bonus of $10,000, a pay increase of $2,434 to offset the cost of increased health insurance coverage at Voyage FCU, and a key-person life insurance cash benefit of $17,606 that will transfer with the merger.
VFCU COO Julie Becker will receive a one-time bonus of $1,500, a pay increase of $2,434 to offset health insurance costs, and a key-person life insurance cash value benefit of $11,373.
Vermillion FCU showed net income of $184,607 as of year-end, with capital at 9.84%. Voyage FCU posted net income of $1.117 million and net worth of 9.94% as of Dec. 31.
A Sequoia That Isn’t Big Enough
Merging Credit Union: Sequoia FCU, Redwood City, Calif.
Assets: $43.22 million
Members: 1,660
Year Chartered: 1952
Date of Member Vote: March 20
Acquiring Credit Union: Premier One CU, San Jose, Calif.
Assets: $550.72 million
Members: 25,066
Sequoia FCU’s board told members the merger is in their best interests “because we want you to receive superior services with technology enhancements. Costs have been prohibitive for us to offer solutions to various financial choices for you, our member. Membership has declined and we are not attracting new markets who demand various services.”
Sequoia had net income of $117,385 for 2022, closing the year with 9.56% capital. Premier One had $1.145 million and net worth of 8.82% as of year-end.
Earlier Reports
Earlier reports in this series can be found here:
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