ALEXANDRIA, Va.–A review by CUToday.info of the 18 latest credit union merger disclosures provided to NCUA finds the usual suspects cited as reasons for the mergers—“more products and services”—but also insights into the payouts some executives are getting (and improved compensation for all employees in one case), which CUs are distributing net worth, which are not for what seem like odd reasons (such as the acquiring CU has more branches), and even one CU that says it can no longer go on due to the loss of its sponsor company’s “benevolence.”
CUToday.info has been regularly reporting on all the merger disclosure forms filed by NCUA, which requires credit unions to inform members of the reasons for a merger, who will benefit, whether any will be distributed (and why or why not), along with other information. NCUA also requires credit unions to give their members the opportunity to express opinions on proposed mergers.
Below is an overview of the first half of the newest 18 merger disclosure forms filed with NCUA. On Thursday, CUToday.info will provide the same information for the second half of those CUs.
Payouts for ‘Numerous Individuals,’ Including Former CEO
Merging Credit Union: Embark CU, Great Falls, Mont.
Assets: $137.1 Million
Members: 9,870
Acquiring Credit Union: Horizon CU, Spokane Valley, Wash.
Assets: $1.73 billion
Members: 103,570
Spokane Valley. Wash.-based Horizon CU is looking to cross state lines by merging in the $134-million, Great Falls, Mont.-based Embark FCU.
In its disclosure to members, Embark CU said it is seeking to merge because in an extremely competitive financial services environment. Catering to the future needs of current and future members is a road paved with substantial risk, although Embark’s financial resources sufficiently support current operations. In that vein, the combined expertise of both credit unions in every department will make the merged credit union stronger in serving membership and covering the entire charter.”
Moreover, Horizon said Embark offers substantially better e-commerce and digital offerings to members, while the merger will lead to expanded offerings overall, the credit union stated.
Embark also said Horizon will establish a “physical tribute” to the credit union in Embark’s current main branch, and will also $30,000 toward community outreach for two years after the merger.
Embark said there will be no net worth distribution to members if the merger is approved.
But Embark did say that numerous individuals, who were not identified in the disclosure forms, will receive payouts related to the merger, including vice presidents/assistant vice presidents, who will be paid between $10,000-$15,000; “Key contributor” positions, who will be paid between $2,500-$5,000, and all other employees, who will receive $1,500 each.
Current Embark CEO Deb Evans will become “regional leader-corporate integration’ after the merger at a salary of $168,000- annually. In addition, Evans is to receive a bonus of $100,000, with half paid by Embark prior to the merger. Evans is also to be employed through April of 2023, and should she depart for any other reason other than cause prior to that date she is to be compensated.
Evans is also to be provided with a deferred compensation plan that pays out either $500,000 in a lump sum, or $24,730 each year over 20 years.
Embark reported $1.132 million in net income during 2021, with 11.11% capital. Horizon CU reported $19.4-million in net income and capital of 11.98%.
The combined CU would have approximately 113,000 members.
A member vote is scheduled for May 5.
In Ohio, Management Team is Retiring
Merging CU: Sherchem FCU, Ashtabula, Ohio,
Assets: $3.3 million
Members: 462
Acquiring CU: Lakeview FCU, Ashtabula, Ohio
Assets: $144.3 million
Members: 9,322
In its disclosure to members, Sherchem FCU said the merger is in the best interests of members because the “management team” is preparing to retire and there is “difficulty” in finding knowledgeable people to replace them on a part-time basis. The credit union said it was also challenged to find volunteers for the board and committees.
Sherchem said it will not be distributing any of its net worth as part of the merger, it will not be paying any member of management any amount as a result of the combination.
Sherchem FCU lost $7,705 during 2021, and closed the year with 14.16% capital.
Lakeview FCU reported $472,251 in net income and capital of 10.46% at year end.
A vote is scheduled for May 5.
In Utah, CU for Prison Employees Looks to Break Out From Limited Service
Merging Credit Union: Utah Prison Employees Credit Union, Draper, Utah
Assets: $3.2 million
Members: 1,242
Acquiring Credit Union: P&S Credit Union, Salt Lake City
Assets: $17.5 million
Members: 1,604
In its notice to members, Utah Prison Employees CU said it is merging to provide increased products and services to members, as well as to provide an additional location to members. UPECU also said it will not be distributing any net worth nor will there be any payout to members of management as a result of the merger.
Founded in 1954, Utah Prison Employees CU reported $12,383 in net income for 2021, with capital of 9.79%.
P&S Credit Union reported $23,687 in net income and capital of 7.60% for the same time period.
Members are to vote on the merger on May 11.
In Texas, Red Marks on Report Card Lead to Merger
Merging Credit Union: Teachers Alliance FCU, Longview, Texas
Assets:0 $565,715
Members: 350
Acquiring Credit Union: Telco Plus FCU, Longview, Texas
Assets: $83.5 million
Members: 8,215
In its disclosure to members, Teachers Alliance FCU said “the continuing credit union is of similar intent, offers a much greater selection of products and services, and has better hours of operation.”
Although it has capital of 23.76%, TAFCU said it will not be distributing any capital to members, nor will there be any merger-related payout to members.
Teachers Alliance lost $75,743 in 2021 (or 13% of its assets).
Telco Plus FCU reported $1.018 million in net income in 2021, with net worth of 14.41%.
Members are to vote on the combination on May 16.
Bonus on Savings to Be Paid in Massachusetts
Merging Credit Union: Premier Source FCU, East Longmeadow, Mass.
Assets: $72 million
Members: 4,452
Acquiring Credit Union: Polish National CU, Chicopee, Mass.
Assets: $705 million
Members: 25,056
In its disclosure to members, Premier Source said that in financial terms it is “relatively small in comparison to competing financial institutions. Premier Source’s modest resources limits its ability to invest in the technology and other services that members demand. Combining Premier Source with PNCU will deliver to our members a broader array of better products and services.”
Premier Source said the merger will not result in any branch closures or staff layoffs.
With net worth of 12.97%, compared to Polish National’s 12.42% at year-end, Premier Source said it will pay an extraordinary dividend “immediately before the merger.” The bonus will be based solely on share account balances and will amount to approximately $2.2 million, according to the credit union.
In addition, Premier Source said the merger agreement calls for its current CEO, Bonnie Raymond, to become SVP-member experience after the merger at a salary equal to other PNCU SVPs. The credit union will also provide Raymond with a Supplemental Executive Retirement Plan (SERP) that includes an insurance policy with a face value of $3.12 million that will be funded by a loan from PNCU of $2.23 million that is to be repaid to Polish National upon Raymond’s death, and a retirement benefit that will pay $75,000 annually for 15 years.
Premier Source reported net income of $239,719 in 2021, with net worth of 12.97%. Polish National CU reported net income of $5.765 million, with net worth of 12.42%.
The member vote is scheduled for May 16.
Fittingly, Farmers Remain in the Heartland
Merging Credit Union: Farmers CU, Hays, Kan.
Assets: $17.15 million
Members: 1,005
Acquiring Credit Union: Heartland CU, Hutchinson, Kan.
Assets: $477.6 million
Members: 32,208
“Over the past few years, management and the board of directors of Farmers Credit Union have looked for ways to bring better financial products and an improved member experience to our members,” Farmers CU said in its statement to members. “Unfortunately, a rapidly changing business climate, increasing regulatory burden, and staffing challenges have proven very difficult to overcome on our own. The board determined the most efficient and effective way to meet the goals of providing better products and services was through a merger with a larger credit union that has the resources to make it possible.”
Farmers CU said the merger will lead to improvements at its branch, and that one of its board members will serve on an Advisory Board to the Heartland CU board of directors for a period of no longer than three years.
Farmers further said the merger agreement calls for Heartland CU to donate $25,000 per year for three years to support charitable causes recommended by the FCU Advisory Committee.
Farmers CU said there will be no share adjustment paid out of its capital as a result of the merger, and that no one with the credit union will receive any merger-related compensation.
Farmers Credit Union reported a net loss of $102,988 during 2021, with net worth of 8.99%. Heartland Credit Union posted net income of $10.548 million and net worth of 9.76%
The special meeting on the merger is scheduled for May 23.
Lack of ‘Excess Capital’ is Cited
Merging Credit Union: United 1st CU, Kingsland, Ga.
Assets: $242.6 million
Members: 26,684
Acquiring Credit Union: Georgia’s Own CU, Atlanta
Assets: $3.4-billion
Members: 208,658
In its statement to members, United 1st said Georgia’s Own will provide its members with a wider selection of competitive financial products and services, “as well as convenient methods to access those products and services.” In addition, Georgia’s Own will provide access to more branches and ATMs, United 1st told its members, noting it also lacks “excess capital.”
United 1st’s disclosure form did not indicate any sort of payment to either members or former members of management will be made.
United 1st reported $1.95 million at year-end 2021, with net worth of 9.16%. Georgia’s Own reported $24.6333 million in net income and net worth of 10.85%.
A member vote is set for May 23.
‘More Convenient Access’ Cited
Merging Credit Union: Allegheny Metal FCU, Leechburg, Penn.
Assets:$14.7 million
Members: 1,686
Acquiring Credit Union: Century Heritage FCU, Pittsburgh
Assets: $207.3 million
Members:17,244
In its disclosure to its members, Allegheny Metal FCU said it was seeking to merge in order to provide members with a wider array of products and services, to provide more convenient access via more branches and ATMs, and to be able to provide greater operational efficiency through economies of scale.
AMFCU said it will not be distributing a portion of its net worth “because of the benefit accrued to Allegheny Metal’s members will be compensated with increased branch access, new products and services and “ongoing efficiencies.”
The disclosure does not indicate any payment will be made to members of management and/or board members.
Allegheny Metal FCU lost $5,201 as of March 31. Century Heritage FCU reported $591,708 at year-end 2021 with 9.47%.
Members are to vote on the merger on May 31.
Name to be Retained Post-Merger; 2 Execs Get Payouts
Merging Credit Union: Global CU, Spokane, Wash
Assets: $605.62 million
Members: 46,322
Acquiring Credit Union: Alaska USA, Anchorage, Alaska.
Assets: $10.7 billion
Members: 711,111
Global CU told its members in its disclosure form that the merger is in their best interest because the two CUs have similar origins, fields of membership, overlapping fields of membership. And corporate cultures centered on what is best for the members. Global said it will retain its name and branches after the merger and will continue to expand in the Spokane, Wash., and Coeur d’Alene, Idaho markets.
GCU said members will not receive any payout but two management members will receive payouts, including:
- Global CU President/CEO Jack Fallis, who the CU said has a change of control provision in his contract, will become president-Pacific Northwest and international markets, and upon the merger date will receive a one-time payment of $875,000.
- CIO David Cummings will be compensated at the same rate of pay he currently receives, according to the disclosure statement, and will be eligible for a payment of $185,000 upon successful integration of the data systems.
Global CU reported net income of $5.083 million in 2021 with net worth of 8.52%. Alaska USA reported $108.5 million in net income during 2021, with net worth of 9.07%.
The member vote is scheduled for June 1.