ALEXANDRIA, Va.–CUToday.info’s latest review of disclosure documents filed by credit unions seeking to merge finds many of the standard reasons cited for seeking to combine (lack of resources, management retirements), but also cases where documents required by NCUA are missing, a wide disparity in plans for distributing capital (one CU said it couldn’t pay out net worth due to payments to three employees), and one case where there was just a blank space left behind the words “reasons merger is in best interests of members.”
In all, this latest review by CUToday.info covers 21 separate merger proposals, some of which are not to be voted on until October.
To allow readers to review what credit unions are telling members about their merger plans, as well to review some of the financials reported below, CUToday.info will break up this latest report into three parts featuring seven credit unions each.
Here is part I:
‘Tilted Competitive Scales’ Cited as Employees Get Payout
Merging Credit Union: Financial One Credit Union, Columbia Heights, Minn.
Assets: $202.2 million
Members: 10,539
Year Founded: 1933
Date of Member Vote: Aug. 30
Acquiring Credit Union: Magnifi Financial CU, Melrose, Minn.
Assets: $1.655 billion
Members: 74,183
Financial One told members it is seeking to merge because rapidly changing consumer preferences and the elimination of geographical work boundaries have tilted competitive scales heavily in favor of larger financial institutions. These institutions have the financial and human resources available to meet elevated consumer expectations for electronic and other services.
“They also have the resources necessary to meet evolving workplace expectations, which include substantially higher pay at all levels and flexible work schedules that are simply unfeasible for smaller work forces,” the credit union continued. “Combine the ability of larger institutions to pay more than smaller ones for the same job to the flexibility of working from home, and the competitive landscape looks nothing like it did just twelve months ago.”
Financial One further told members the merger will lead to more electronic access, better product and services, 25 combined branch locations, a dedicated contact center and even bitcoin trading.
Merger-Related Compensation
Although more than $180,000 will be paid to senior management in the form of salary increases and retention bonuses, and an undisclosed amount equal to other employees in the form of retention bonuses, Financial One said no net worth distribution is planned.
All employees, excluding the CEO, will receive a retention bonus of 10% of their current annual salary or annual cumulative hourly wage within 30 days prior to the merger’s effective date.
In addition, all employees, excluding members of the executive team, who are employed at Financial One Credit Union on the date preceding the merger date are eligible to receive a severance payment equal to one week of their then current base salary or base wage for every year of service, if terminated without cause.”
Who’s Getting What
In addition, Financial One said:
· Its CEO will be offered post-merger employment with Magnifi Financial Credit Union with a minimum five-year term. His initial post-merger salary will equal the salary he received prior to the merger
· The CFO of Financial One will be offered post-merger employment with Magnifi Financial Credit Union, with a minimum two-year term and an initial salary increase of $8,400.00 per year. She will also receive a retention bonus of $56,000 prior to the merger.
· The chief lending officer of Financial One Credit Union will be offered post-merger employment with Magnifi Financial Credit Union, with a minimum two-year term and an initial salary increase of $5,200 per year. She will also receive a retention bonus of $48,000 prior to merger.
· The CIO of Financial One Credit Union will be offered post-merger employment with Magnifi Financial Credit Union, with a minimum two-year term and an initial salary increase of $28,400 per year. He will also receive a retention bonus of $35,000 prior to merger.
Financial One CU reported net income of $760,871 and net worth of 9.07% as of March 30. Magnifi Financial reported $2.8 million in net income and net worth of 13.1%
In Nevada Merger, Compensation to be Paid to 3 Employees
Merging Credit Union: Las Vegas UP Employees FCU, Nevada
Assets: $4.2 million
Members: 759
Year Founded: 1952
Date of Member Vote: Aug. 30.
Acquiring Credit Union: WestStar CU, Las Vegas
Assets: $265.3 million
Members: 20,937
Las Vegas UP Employees FCU said in its statement to members that the merger will allow it to provide the kinds of products and services it cannot, including first mortgages, HELCs, debit cards, mobile banking, additional branches and more.
LVUPEFCU said it will not be distributing any net worth because “after disposition of financial obligations related to the proposed merger, the remaining net worth will support the ongoing operations of the merged credit union and maintain the current net worth position. It will not result in a material increase in the net worth ratio of the Continuing Credit Union.”
Staff Compensation
The three employees of LVUPEFCU will receive merger-related compensation, including:
- CEO Nektaria Felecos, who is to be employed for at least two years, will receive retention pay and yearly salary with a total value of $133,570.26. In addition to a position at one of the WestStar’s branches, Felecos will receive retention pay (gross $29,700) at the time of the merger, as well as if she is employed at six months (gross $29,700) and employed at 12 months (gross $29,700) post-merger. She will also receive a distribution at the closing of the Las Vegas UP Emp FCU retirement plan sometime in Q3 2022.
- Assistant Manager Charina Bustos is to receive retention pay and salary totaling $67,805.36. In addition to her annual salary and a position at a branch, Bustos will receive retention pay (gross $18,000) at the time of the merger, as well as if she is employed at six months (gross $18,000) and employed at 12 months (gross $18,000) post-merger. She will also receive a distribution at the closing of the Las Vegas UP Emp FCU retirement plan sometime in Q3 2022.
- Teller Beza Buruk, who is to be employed by WestStar for a minimum of two years after the effective date of the merger will receive in addition to her salary retention pay (gross $12,672) at the time of the merger, as well as if she is employed at six months (gross $12,672) and employed at 12 months (gross $12,672) post-merger. She will also receive a distribution at the closing of the Las Vegas UP Emp FCU retirement plan sometime in Q3 2022.
LVUPEFCU reported a loss of $14,724 during Q1, with capital of 29.4%. WestStar CU reported $331,811 in net income and capital of 9.27% as of the same date.
Massachusetts CU Posts Losses, Seeks Help From St. Jean
Merging Credit Union: Lynn Municipal Employees CU, Lynn, Mass.
Assets: $3.040 million
Members: 459
Year Founded: 1941
Date of Member Vote: Aug. 30
Acquiring Credit Union: St. Jean’s Credit Union, Lynn, Mass.
Assets: $338.4 million
Members: 19,324
Lynn Municipal Employees reported a $40,408 loss through midyear, with capital of 19.41%. St. Jean’s CU reported net income of $636,663 as of June 30, with capital of 8.45%.
Merger is Good For Members Because…Blank
Merging Credit Union: US Court House SDNY FCU, New York
Assets: $3.6 million
Members: 472
Year Founded: 1949
Date of Member Vote: Sept. 5
Acquiring Credit Union: The Finest FCU, New York
Assets: $23.1 million
Members: 6,618
In its statement to members, USCHSDNYFCU said the board of directors has concluded the proposed merger is desirable and in the best interests of members “because,” and then the field is left blank and no reasons are provided.
Although it has high net worth and fewer than 500 members, U.S. Court House SDNY FCU said it has no plans to pay out a distribution of its net worth to members and there will be no payouts to members of management or the board as a result of the merger.
U.S. Court House SDNY FCU reported negative net income of $21,292 for the first two quarters of 2022, with net worth of 17.26%. The Finest FCU posted $278,860 in nete income with net worth of 13.30% as of the same date.
An ‘Optimal Fit’ & ‘Long-Term Viability’ Are Cited
Merging Credit Union: Dearborn County CU, Lawrenceburg, Ind.
Assets: $15.5 million
Members: 1,890
Year Founded: 1962
Date of Member Vote: Sept. 7
Acquiring Credit Union: Hoosier Hills CU
Assets: $839.2 million
Members: 34,006
In its member notice, Dearborn County FCU said the merger is being pursued because of the “optimal fit and similarities in culture and strategy, the long-term viability this option offers to the employees and the membership, and the availability of additional resources and enhanced capabilities, products and services…DFCU membership will benefit from more favorable rate options, a comprehensive suite of product offerings, and increased accessibility through technology and planned expansion, all with the local service their membership should expect.”
Dearborn County FCU said there will be no share adjustment as a result of the merger and indicated no payout to members of the board of management.
DCFCU reported $8,594 in net income for the first half of the year, with capital of 11.22%. Hoosier Hills had $2.842 million in net income and capital of 12.19% as of June 30.
In Texas Merger, Disclosure Docs Not Filed
Merging Credit Union: Abilene Federal Credit Union, Abilene Texas
Assets: $31.5 million
Members: 2,837
Year Founded:1950
Date of Member Vote: Sept. 8
Acquiring Credit Union: Texas Tech FCU, Lubbock, Texas
Assets: $334.5 million
Members: 28,654
As of this reporting, Abilene CU has filed only its notice to members of its intent to merge. It has not filed the disclosure document related to why it is seeking to merge, any plans for a capital distribution or any payout to board/management members.
Abilene FCU reported a loss of $31,566 as of June 30, with net worth of 13.66%. Texas Tech showed $677,834 in net income, with net worth of 10.6% as of mid-year.
Indiana Merger Proposal Does Not Include All Information
Merging Credit Union: Hulman Field Technicians FCU, Terre Haute, Ind.
Assets: $9.4 million
Members: 592
Year Founded: 1959
Date of Member Vote: Sept. 8
Acquiring Credit Union: Crane CU, Odon, Ind.
Assets: $931.4 million
Members: 63,974
Hulman Field Technicians FCU filed only one of two documents required by NCUA related to the merger. In a letter to members, it says merger with the larger Crane CU will enhance membership in “many ways,” including a wide array of loan and deposit products, business services, online and mobile banking, remote check deposit, shared branching and more.
The letter did not indicate anything related to a bonus distribution or compensation paid to board or management.
HFTFCU showed a loss of $7,891 on its June 30 call report, with net worth of 15.30%. Crane CU had net income of $4.540 million, with net worth of 11.67%.
Louisiana CU Cites 5 Reasons for Merger, Including Inability to Find New Manager; Bonus to be Paid
Merging Credit Union: Terminal CU, Metairie, La.
Assets: $16.2 million
Members: 826
Year Founded: 1951
Date of Member Vote: Sept. 12
Acquiring Credit Union: Riverland CU, New Orleans
Assets: $290.8 million
Members: 15,407
In telling members why it needs to merge, Terminal CU listed a number of bullet points, including:
- Difficulty meeting increased regulatory requirements
- Difficulty staying up to date with technology necessary to best serve members
- Cannot afford to implement additional services to retain or attract new members
- The former manager resigned and “finding a qualified replacement will be difficult and cost-prohibitive”
- Increasing difficulties getting board members to participate in the operation of the credit union
Terminal CU said it will distribute a portion of its net worth to members as a 5% bonus dividend because its capital is higher than that of Riverland CU. The dividend will be paid based on regular share balances as of Dec. 31, 2021.
The member disclosure indicated no payments to be made to anyone in management or on the board.
Terminal CU had net income of $50,947 at mid-year, with capital of 23.92%. Riverland CU showed net income of $861,880 and net worth of 10.19% as of June 30.
Earlier Reports
CUToday.info reports on all mergers. Links to earlier reports are below:
Jan. 12
March 16
April 26
https://www.cutoday.info/Fresh-Today/What-Review-of-Latest-CU-Merger-Proposals-Reveals-Part-I
April 27
https://www.cutoday.info/Fresh-Today/What-Review-of-Latest-CU-Merger-Proposals-Reveals-Part-II
May 17
May 18
June 8
June 28