RENO, Nev.–CUToday.info’s newest update on why credit unions say they have to merge finds the standard “improved products and services” listed, but also many CUs pointing to costs of regulation and technology, as well as merger-related compensation packages (including for one CU’s chairman), just a few distributions of net worth even in highly capitalized CUs, a CU where both employees have died, and the end for a small CU serving the lone Macy’s in Montana.
In all, CUToday.info has updates on 19 credit unions that have filed merger-related disclosure forms with NCUA. This is part-one of a two-part series on these newest merger announcements.
Reports so far this year by CUToday.info include: Jan. 16, Jan. 17.
Greater Scale, More Product Offerings are Cited
Merging Credit Union: Reno City Employees CU, Reno, Nev.
Assets: $32.8-million
Members: 1,798
Date Chartered: 1952
Date of Member Vote: April 23
Acquiring Credit Union: Great Basin FCU, Reno, Nev.
Assets: $275.7 million
Members: 22,635
In its statement to members, Reno City Employees said merging will provide “significant and lasting benefits and value” to its members. RCECU cited additional products and services as a benefit, as well as membership in a credit union “well-positioned to grow and increase member value over the long term.”
Specifically, RCECU said access to three additional branches, six proprietary ATMs/ITMs, access to a shared branch network and online live chat.
In addition, the combined CU will have greater scale, which will lower operating costs, the credit union said, saying that will contribute to “greater levels of member service,” improved data security, enhanced liquidity for lending, and more.
Citing merger-related costs it said there will be no payout of capital to members and that its branch will close.
Reno City Employees closed 2023 with $182,056 in net income, and capital of 9.95%. Great Basin ended the year with $3.28 million in net income to go with capital of 10.28%.
SUFCU to Help Itself With Self-Help; Tiny CU Paying Dividend
Merging Credit Union: Shaw University FCU, Raleigh, N.C.
Assets: $562,536
Members: 127
Date Chartered: 1969
Date of Member Vote: April 26
Acquiring Credit Union: Self-Help Credit Union, Durham, N.C.
Assets: $2.093 billion
Members: 100,997
Shaw University FCU told members a merger is in their best interests because like SUFCU, Self-Help is also a minority deposit institution with a “strong history of serving immigrants, rural communities and other excluded from the financial mainstream.
It also cited expanded product and service offerings.
Although Self-Help CU has a higher net worth ratio than SUFCU (the two CUs have some of the highest net worth in the country), the credit union said it will distribute a portion of its capital to members in the form of a 6% special dividend on member shares.
Shaw University FCU posted a loss of $178 through Q1, with net worth of 19.98%. Self-Help CU had net income of $37.1 million as of year-end 2023, with capital of 27.69%.
We Don’t ‘Need to Merge’ Says Ignite CU, as One Member Questions Value
Merging Credit Union: Ignite Credit Union Grandville, Mich.
Assets: $152.4 million
Members: 14,013
Date Chartered: 1945
Date of Member Vote: April 29
Acquiring Credit Union: BlueOx Credit Union, Battle Creek, Mich.
Assets: $224.3 million
Members: 17,995
In explaining why it needs to merge, Ignite CU said it is “financially strong” and “does not need to merge,” but that in “today’s high-tech environment, the costs of technology and regulations, coupled with the cost of recruiting and retaining talented employees, demonstrate that larger organizations can do more for their members.”
Ignite said the two CUs share similar philosophies, and that all employees and branches will remain, while five of its board members will join the board of BlueOx Credit Union.
One member, Thomas Armantrout, did post a comment on NCUA’s site, urging other members to vote against the merger.
‘No Tangible Reasons’
“No tangible reasons have been provided for the merger. Only vague references to being able to provide better services by growing. Nothing specific to be provided or enhanced has been given,” Armantrout wrote. “By Ignite's own admission, they state "Ignite Credit Union (the "Credit Union") is a financially strong credit union serving its members and DOES NOT NEED TO MERGE to survive." (capital emphasis mine).”
Armantrout noted Ignite has higher capital than BlueOx, and said the merger “does NOT enhance value to Ignite members. It merely assists in subsidizing an under-performing entity.”
“Currently, the Ignite model of merger & integration, is to maintain all subsidiary credit unions (currently Allegan CU & Rivertown CU) on separate core servers,” Armentrout continued. “What this means (among other things), is that new products and services supposedly promised by management cannot and will not be implemented evenly across all 3 entities. They have to be implemented one at a time, and integrated into each system separately. Who is going to have these new services first? Which credit union members will be primary, and which will be secondary? As the surviving entity receiving a new windfall of capital, I don't believe it's unreasonable to expect that BlueOx members will have any new services generated, which can now be subsidized by obtaining Ignite's higher worth. In this merger, we are basically giving away our saved earnings to pay for another Credit Union membership's services.
“Admittedly, it is in the best interests of top management to merge,” the member statement continues. “A salary overseeing a combined $375 million in assets, rather than the $153 million held by Ignite alone, is almost certain. But as management hasn't publicly promoted this perk of the merger, I feel no need to do it for them.”
The merger disclosure document does not indicate any merger-related compensation increases for management, as is required by NCUA’s rules.
The Financials
At year-end 2023, Ignite Credit union posted $1.57 million in net income, with reserves of 12.24%. BlueOx had $3.187 million in net income and capital of 9.70% as of the same date.
New Services are Touted
Merging Credit Union: South Towns Community FCU, Lackawanna, N.Y.
Assets: $18.6 million
Members: 2,044
Date Chartered: 1967
Date of Member Vote: May 8
Acquiring Credit Union: One Credit Union of New York, Cheektowaga, N.Y.
Assets: $89.1 million
Members: 7,041
The board of South Towns Community FCU told members they should vote in favor of merging because One Credit Union will be able to offer mobile check deposit, 55,000 surcharge-free ATMs, bill pay, mobile wallet and other services, as well as two additional branches. The STCFCU branch will remain open.
As part of the merger, Diana Lavis, CEO for the past 25 years at South Towns, will receive severance of $121,560, the credit union said.
Through Q1, South Towns Community posted $28,169 in net income, with net worth at 8.19%. One Credit Union had $489,846 in net income as of March 30, with capital of 12.99%.
Both Credit Union Employees Have Passed Away
Merging Credit Union: Cabway Telco FCU, Huntington, W.V.
Assets: $5.34 million
Members: 364
Date Chartered: 1955
Date of Member Vote:
Acquiring Credit Union: Star USA FCU, Charlestown, W.V.
Assets: $172.5 million
Members: 15,087
Cabway Telco FCU said it is seeking to merge because of “staffing issues related to the passing of both credit union employees.” It said Star USA FCU also offers more services and branches.
CTFCU said it will pay a special dividend of 3.25% on savings as of year-end 2023, for a total payout of $111,000, if the merger is approved.
Cabway Telco closed 2023 with $22,078 in net income and capital of 27.02%. Through Q1, Star USA FCU showed a loss of $68,678 (it posted a $92,057 loss in 2023) with net worth of 9.04%.
CU Posted a Loss, but Payout for Two Execs
Merging Credit Union: Encurage Financial Network CU, Chicago
Assets: $220.8 million
Members: 11,746
Date Chartered: 2000
Date of Member Vote: May 13
Acquiring Credit Union: Great Lakes CU, Bannockburn, Ill.
Assets: $1.31 billion
Members: 80,830
Encurage Financial told members a merger will bring more scale and makes “long-term strategic sense.” It also listed numerous additional branch locations.
As a result of the merger, EFNCU said president and CEO Michael Abraham will see a change in base salary of $20,300, while COO Susan Beckwith will see a boost of $15,000.
But there are also other benefits. According to the disclosure, if the employment of Abraham or EVP/CFO William Lump is involuntarily terminated for reasons other than cause, or terminated for good reason with 12 months of change of control, their individual Encurage split dollar program will become 100% vested. Abraham’s split dollar plan value is $783,530, while Lump’s is $1.561 million.
Encurage Financial had a loss of $400,266 at year-end 2023, with capital at 7.28%. Great Lakes reported $2.7 million in net income and capital of 9.05% as of the same date.
‘Limited Growth Opportunities’ are Cited
Merging Credit Union: Local 520 U.A. FCU, Harrisburg, Penn.
Assets: $7.76 million
Members: 1,586
Date Chartered: 1961
Date of Member Vote: May 16
Acquiring Credit Union: Hershey FCU, Hummelstown, Penn.
Assets: $104.3 million
Members: 7,816
Local 520 U.A. FCU told members it has experienced “increased expenses year over year” and that with “limited growth opportunities the ability to provide enhanced services to the member has become costly.”
A merger, the CU added, will provide more products, loans, technology, staff support and more.
Two people are to receive merger-related compensation. CEO Jenna Stabley will get a one-time payment of $70,000 to ensure she remains onboard over the next 18 months to ensure completion of the merger. MSR Cathy Steninger will receive $8,400 for the same reason.
Local 520 had $60,711 in net income during 2023, with capital at 17.76%. It did not indicate any plan to distribute capital.
Hershey FCU had $885,675 in net income, with capital at 8.58% as of year-end.
In Connecticut Merger, Merger-Related Comp to be Paid
Merging Credit Union: First Bristol FCU, Bristol, Conn.
Assets: $106.6 million
Members: 5,687
Date Chartered: 1935
Date of Member Vote: May 22
Acquiring Credit Union: Nutmeg State Financial CU, Rocky Hill, Conn.
Assets: $584.7 million
Members: 43,332
By combining “energies and resources,” a merged CU will offer “lasting benefits and value,” First Bristol told members, citing improved convenience and account access (it said its two branches will remain open), a host of new products and services (including credit cards with loyalty programs, more checking options, no NSFs or OD fees) and additional lending products.
In addition, it said lower operating costs will also benefit members.
Citing expenses and “write-downs,” as well as the “ability of our members to share in the higher net worth ratio of the combined credit union,” not net worth distribution is planned.
Merger-Related Comp
Members of the FBFCU management team will see-merger related compensation, including:
- President and CEO Mark Cornacchio, who will received a one-time merger completion bonus of $150,000
- CFP Christopher Taylor, who will receive a one-tome loyalty bonus at the end of his three-year contract equal to six months of his current salary, and also be paid accrued but unused vacation salary of approximately $41,000
- CAO Julie Marchetti is to receive a two-year agreement at her current salary and also a one-time loyalty bonus equal to six months of her current salary, and also be paid accrued but unused vacation salary of approximately $39,000
- Collections Manager Jose Tintone, who will receive a two-year agreement at his current salary and also a one-time loyalty bonus equal to six months of his current salary, and also be paid accrued but unused vacation salary of approximately $19,000.
First Bristol FCU had $68,308 in net income during Q1, with capital of 9.68%. Nutmeg State had year-end 2023 income of $2.04 million, with capital of 13.49%.
In Louisiana, a Profitable CU is Merging Into Unprofitable CU; Large Health Benefits for 2 Execs
Merging Credit Union: Louisiana FCU, La Place, La.
Assets: $397.1 million
Members: 36,170
Date Chartered: 1971
Date of Member Vote: May 29
Acquiring Credit Union: OnPath FCU, Metairie, La.
Assets: $616.6 million
Members: 53,745
Louisiana FCU cited five benefits of a merger:
- Expanded branches
- More products and services (although it did not list what they are)
- More “responsive to evolving financial needs”
- Enhanced electronic banking products
- Same knowledgeable, friendly employees
Merger-Related Comp
LFCU said there will be no member payout from capital.
Two members of management, however, will receive merger-related compensation.
- CEO Rhonda Hotard will receive post-retirement supplemental health insurance worth $460,000
- CFO Melissa Matherne will receive supplemental health post-retirement health care valued at $300,000
Louisiana FCU reported $2.13 million in net income and capital of 13.73% (there will be no net worth distribution) as of year-end. OnPath FCU had a loss of $2.81 million, with net worth of 9.33% as of year-end.
Combo to Create Multi-Billion-Dollar CU
Merging Credit Union: Centra Credit Union, Columbus, Ind.
Assets: $2.076 billion
Members: 156,955
Date Chartered: 1997
Date of Member Vote: June 3
Acquiring Credit Union: Hoosier Hills, Bedford, Ind.
Assets: $907.1 million
Members: 37,912
Centra Credit Union provided members with nine paragraphs of reasons why they should support a merger, beginning with that they are “aligned in their commitment to members.”
‘Trends in the financial services industry clearly point to the need for greater scale,” the message to members reads. “Upon closing, the combined credit union will have approximately $3 billion in total assets, which will support sustained and strengthened service to members though enhanced products, technology and convenience, as well as pricing. The larger footprint of the combined credit union will also support strong organic growth for the future.”
CCU also cited ongoing employment opportunities, new wealth management services, community support, expansion into underserved markets and more.
The Management Plan
Plan call for Centra CU CEO Rick Silvers to lead the merged institution, with Hoosier Hills CU CEO Travis Markle becoming chief experience officer.
Centra Credit Union had net income of $9.17 million during 2023, with capital at 12.39% as of year-end. Hoosier Hills reported $4.61 million in net income and net worth of 8.86% as of the same date.