MADISON, Wis.–The $34-million Post Office Credit Union here is asking its members to vote on merging into the $26-billion PenFed Credit Union, with an offer of a $200 payout per member should the combination be approved and generous compensation to two POCU executives should they exit the organization.
The offer is similar to that PenFed made in merging in New York-based Sperry Associates FCU, where members were each paid $350 out of capital when the merger was approved, as CUToday.info reported here.
In a notice to members on its website, Post Office Credit Union said the merger will allow “us to bring forth the best value of both credit unions into an even better combined credit union.”
Members were told the current POCU branch will remain in place, they will be offered “better rates, as a result of combined financial resources” (although a separate fee disclosure indicates fees charged by PenFed are higher than those at POCU); state-of-the-art secure online and mobile platforms; 48 branches; best in class credit card offerings, 68,000 surcharge-free ATMs worldwide and more.
“In today’s landscape of digital transformation coupled with evolving technology, regulatory compliance, and increasing cybercriminal threats, our board of directors evaluated strategic possibilities to assure that you, our member, will continue to receive the full range of products and services you deserve,” POCU said in a disclosure to members. “To ensure continuity of operations while seeking to expand product offerings and improve services, we have been diligently searching to find alternatives. We have explored a range of options, including collaborating with like institutions to consolidate key support functions, maintaining the current course alone, or merging with a strong and proven performer. While there are some benefits with each option, only one 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. After considering alternatives, we determined that a merger with PenFed is in the best interest of our members.”
22% Capital
POCU reported $32,000 in income for the first nine months of the year and net worth of 22.15% as of Sept. 30, which is considerably higher than PenFed at 10.67%.
POCU said if the merger is completed a one-time capital distribution of $200 will be paid to members for a total payout of $640,000.
In its disclosure, POCU said all staff will be retained and will be offered improved benefits, with each employee being offered a three-year employment offer—with the exception of the CEO and vice president–with select employees to receive a retention bonus of up to 10% of their salary, not to exceed $10,000 for any employee.
Executive Compensation
The disclosure further states POCU CEO Kevin Yaeger will be offered a five-year contract with a $13,000 annual raise, while VP Tammie Stuntebeck will be offered a three-year employment contract with a $9,200 raise, but the deal also includes generous severance for both should they depart.
The notice to members notes:
- If termination of employment by either party occurs within 18 months after the merger completion date, 42 months of his then annual salary. Beginning with the 19th month of employment following the merger completion date and for each successive month, up to the 60th month of employment, one month of severance pay will be deducted from the total 42 month severance guarantee.
- Kevin Yaeger’s proposed annual salary is $125,000; maximum payout if employment is terminated by either party immediately following the merger would be $437,500.
- Stuntebeck is also being offered severance. With a proposed annual salary of $88,700, the maximum payout if employment is terminated by either party immediately following the merger would be $177,400.
- The aforementioned severance packages may result in a one-time payment of $614,900, the disclosure notes.
Support for Charity
The merger proposal also states PenFed has agreed to donate $50,000 per year for five years to support charitable organizations and community events recommended by POCU’s board of directors, who will be serving in an unpaid advisory capacity after the merger.
Fee Changes
According to the disclosure statement, POCU members will generally see an increase in fees once the merger is completed. According to the disclosure, the savings account excessive transactions fee is $10 at PenFed, $5 at POCU; Overdrafts are $30 at PenFed, $25 at POCU; the monthly checking fee is $10 at PenFed, $3 at POCU, and wire transfers are $25 at PenFed, $20 at POCU ($15 if incoming).
Those fees may change depending on statement balances, direct deposit and usage of e-statements, the disclosure states.
To be approved, the merger must have the OK of a majority of members of the credit union who vote on the proposal, not a majority of members.
A virtual special meeting has been scheduled for Dec. 28.