HOUSTON–A board that is “enthusiastic” about a merger, a CU that says it can’t afford technology, two CUs combining even though both have capital issues, another where capital is not an issue at all, and yet another with 50% capital that says no distribution to members is planned, can all be found in this latest review of merger proposals to members.
This is the eighth in a series in The CU Daily that reviews nearly 100 of the most recent merger proposals that have been put in front of credit union members. The series has been divided into articles covering approximately 10 mergers/proposals each, to give time to readers to see what is driving mergers, what members are being told, who’s getting what, and more.
- Part I in this series can be found here.
- Part II in this series can be found here.
- Part III in this series can be found here.
- Part IV in this series can be found here
- Part V can be found here.
- Part VI can be found here.
- Part VII can be found here.
About This Series
All of the reporting has been drawn from the merger-related disclosures required of all federally insured CUs.
Editor’s Note: The financial data cited for each of the credit unions below is drawn from the time period during which the proposed mergers were announced and disclosure forms were provided to members. For that reason, some of the financial data cite performance through the Q2 and Q3 5300 forms, while others cite data through year-end.
Here’s a look at what the CU Daily has found.
In Houston, Two CUs With Negative Income Plan Combo
Merging Credit Union: Transtar FCU, Houston
Assets: $26.4 million
Members: 2,738
Year Chartered: 1951
Date of Member Vote: March 10
Acquiring Credit Union: MemberSource Credit Union, Houston
Assets: $185.6 million
Members: 13,563
Transtar FCU was brief and used boilerplate language in describing for members why a merger is in their best interests, citing more products and services, additional branches, financial stability of a larger credit union, and “ability to immediately expand services for our members without expanding the manpower and investment needed to develop and market such services.”
Three people are to receive compensation tied to the merger, including:
- President/CEO James Tuggle, who will receive $99,141.13 for a 12-month salary guaranty by MemberSource CU.
- MSR Rosalyn Nixon, who will receive $41,891.20 for a 12-month salary guaranty by MemberSource CU.
- Lending Officer Representative Tatum McNeill, who will receive $39,998.40 for a 12-month salary guaranty by MemberSource CU.
Both credit unions posted losses through the third quarter. Transtar FCU posted $112,483 in losses through Sept. 30, with capital at 8.61%. MemberSource CU reported a loss of $222,877, with capital at 11.72% as of the same date.
Board at Struggling VCU ‘Enthusiastically’ Supports Tie-Up
Merging Credit Union: Vocality Credit Union, Garberville, Calif.
Assets: $143 million
Members: 8,692
Year Chartered: 1980
Date of Member Vote: March 12
Acquiring Credit Union: Community First FCU, Santa Rose, Calif.
Assets: $818.9 million
Members: 61,017
In its statement to members, Vocality CU said its board “enthusiastically proposes” to merge to benefit members’ long-term interests.
“Dramatic changes in the economic environment over the past several years coupled with evolving financial, operating, regulatory and competitive pressures have resulted in irrevocable obstacles to the long-term sustainability of the credit union,” VCU’s board told its members. “…The members we serve and the communities we call home have been the focus of the organization since its inception. Our focus in finding a merger partner was an institution that shares our passion and commitment to the local communities we serve.”
Of particular interest, Vocality CU told members, was maintaining its lone branch in Garberville, Calif., the closure of which would create a “banking desert,” it said. Under the merger plan, the branch will remain open with its staff. Garberville is approximately 150 miles north of Community First’s headquarters in Santa Rose, Calif.
It also cited as benefits of the merger:
- Additional products and services, including ability to get a paycheck up to two days early, electronic access, investment services and more
- An increase in the number of branches to 12 from two, plus shared branching.
Changing Roles
Vocality CU said its president and CEO, Patricia Neighbors, will become chief strategy officer with the combined CU, while other members of management will move to new roles.
To retain those members of VCU management, compensation increases tied to the merger will include, according to VCU, including SVP-Lending Collections Thomas Farmer, who will receive a one-time bonus of $5,768.65 if he remains with the credit union through conversion. He will also be eligible for a payment of $545,007.72 under terms of an existing retirement plan.
Other employees are being offered severance packages in the event of a “reduction in force” within 12 months, including:
- VP-Member Services Chrystine Elstad, eligible for up to $18,565.77
- VP-ERM Tracy McGrew, eligible for up to $18,212.14
- Operations Efficiencies Manager Russell Detroit, eligible for up to $16,254.35
- Collections/Credit Solutions Rep Jose Aldape, eligible for up to $11,501.12
Vocality Community Credit Union had losses of $480,109 through Sept. 30, 2024, with capital at 6.96%. Community First had $1.97 million in net income and net income of 9.26% as of the same date.
In This Merger, Capital Will Not be an Issue
Merging Credit Union: St. Joseph Medical Center Maryland FCU, Towson, Md.
Assets: $14.4 million
Members: 1,538
Year Chartered: 1968
Date of Member Vote: March 18
Acquiring Credit Union: First Financial of Maryland FCU, Sparks-Glencoe, Md.
Assets: $1.25 billion
Members: 71,085
St. Joseph Medical Center Maryland FCU told members the merger will provide shared resources that will allow it to expand product and service offerings, and that the combined credit union will be able to bring its “strong social responsibility” to the communities it serves.
Both organizations, SJMCMFCU said, have strong “value-based” cultures.
St. Joseph’s Medical Center had $30,575 in net income through Q3 of 2024, with net worth of 17.41%. It said it will not return any of that net worth to members because “ownership will be merged into and survive at First Financial of Maryland.” FFMFCU posted $1.06 million in net income and had net worth of 18.32% as of Sept. 30.
Can’t Serve Members Well in ‘Today’s High-Tech Environment’
Merging Credit Union: T&I Credit Union, Clawson, Mich.
Assets: $90.5 million
Members: 3,878
Year Chartered: 1955
Date of Member Vote: March 18
Acquiring Credit Union: Michigan Schools & Government CU, Clinton Township, Mich.
Assets: $3.8 billion
Members: 152,072
“T&I Credit Union is financially strong and capable of serving its members without a merger,” the CU told members. “However, in today’s high-tech environment, larger organizations demonstrate the ability to better handle the increasing costs needed to continue serving members with excellence…”
It also said Michigan Schools & Government CU shares a similar philosophy, offers a larger branch network, expanded digital services, has a “low reliance on fees,” and more. It added that all employees will be retained and one member of its board will join the board of MSGCU.
T&I Credit Union said it will distribute a portion of its 18% net worth if the merger is OK’d, with the amount not to exceed a total payout of $3.18 million. It did not disclose how the payouts to members would be determined.
T&ICU CEO Kathleen L. Karner is to receive merger-related compensation of up to $177,155 “related to the additional merger workload and retention bonus,” the credit union said.
T&ICU reported $159,792 in net income through Q3. MSGCU had $29.8 million in net income and net worth of 12.01% as of the same date.
Net Worth of Nearly 50%, But No Distribution Planned
Merging Credit Union: Pine Bluff Postal FCU, Pine Bluff, Ark.
Assets: $316,902
Members: 74
Year Chartered: 1992
Date of Member Vote: March 13
Acquiring Credit Union: Fairfield FCU, Pine Bluff, Ark.
Assets: $95.6 million
Members: 9,653
Pine Bluff Postal FCU said it has seen a decline in membership as well as the closing of large accounts, which “led to low liquidity,” which is why it is seeking to merge. “Fairfield FCU has much more to offer our members.”
Despite a whopping 48.24% net worth ratio at the time it proposed to merge and with just 74 members, PBPFCU said it will not distribute any of its capital because its assets are “insignificant in relation to Fairfield Federal Credit Union.”
Pine Bluff Postal lost $6,193 dollars through Sept. 30, 2024. Fairfield FCU reported $1.8 million in net income and net worth of 22.37% as of the same date.
Small KY CU No Longer Has Metal to Go it Alone
Merging Credit Union: Gibbs Aluminum Federal Credit Union, Henderson, Ky.
Assets: $5.48 million
Members: 953
Year Chartered: 1967
Date of Member Vote: March 18
Acquiring Credit Union: Heritage FCU, Newburgh, Ind.
Assets: $968.8 million
Members: 65,249
“It is increasingly difficult for credit unions such as Gibbs to maintain sufficient staffing and technology to satisfactorily meet the growing needs of members, industry accounting standards and technology to satisfactorily and regulatory expectations,” the board if the unprofitable GAFCU told members.
A merger, it added, would enhance its ability to meet those expectations and regulations, and it provided a bullet-point list of the enhanced product offerings that will become available if the combo is OK’d.
Gibbs Aluminum FCU noted that Heritage FCU is familiar with its operations, having provided assistance in the past. GAFCU said if the merger is approved an “advisory board” will be created to provide input for at least one year and that its one location will remain open. Kentucky-based Heritage FCU is already operating one branch in its market in Indiana.
Gibbs Aluminum posted a $66,817 loss as of Sept. 30, 2024, with capital at 31.80% (it said it would not be distributing any capital because members would be getting expanded offerings from Heritage FCU).
It’s Not All OK for One Oklahoma CU
Merging Credit Union: El Rino R.I.L. Credit Union, El Reno, Okla.
Assets: $38.6 million
Members: 2,990
Year Chartered: 1934
Date of Member Vote: March 20
Acquiring Credit Union: WEOKIE FCU, Oklahoma City, Okla.
Assets: $1.37 billion
Members: 63,127
El Rino R.I.L. CU, which operates as Rock Island Credit Union, told members a merger with WEOKIE would provide better pricing, services, and products, although it didn’t identify what those might be, as well as economies of scale. It did list the expanded branch locations a merger would provide.
El Rino R.I.L. CU reported a loss of $1.14 million through Q32024, with capital at 11.05%. WEOKIE FCU had $5.75 million in net income and net worth of 12.94% as of the same date.
Rising Charge-Offs Lead to the End of a Legacy
Merging Credit Union: Legacy Financial FCU, Pineville, La.
Assets: $4.97 million
Members: 693
Year Chartered: 1973
Date of Member Vote: March 26
Acquiring Credit Union: Engage FCU, Natchitoches, La.
Assets: $22.8 million
Members: 3,202
Legacy Financial told members it is seeing to merge because of “significant financial difficulties caused by increasing operating expenses and charge-offs.” In addition, it said it has seen erosion of its membership base, and that consolidating with another CU will allow it to address those issues and offer new products and services, including increased access.
Legacy Financial posted a $46,314 loss as of year-end 2024, with net worth of 13.51%. Engage FCU had $430,146 in net income and net worth of 22.09% as of Dec. 31.
Carrying a Torch No More
Merging Credit Union: Torch Lake FCU, Laurium, Mich.
Assets: $11.5 million
Members: 1,633
Year Chartered: 1955
Date of Member Vote: March 26
Acquiring Credit Union: Peninsula FCU, Escanaba, Mich.
Assets: $328.8 million
Members: 15,555
Torch Lake CU told members it needs to merge because its mission aligns with that of Peninsula FCU in that they share a goal of providing responsible financial products and services to everyone in our communities.”
TLCU said its main office will remain open and that members will have access to a wider array of products and services after the combination.
One person will receive compensation tied to the merger. CEO Connie MIkkola will receive an increase in annual salary of $9,000 “based upon the valuable institutional knowledge, credit union relationships, experience with the culture and operations…”
Torch Lake closed 2024 with $68,328 in net income and net worth of 10.10%. Peninsula FCU posted $727,550 in net income and had net worth of 8.53% as of year-end.
Law Enforcement CU Can’t Arrest Ongoing Losses
Merging Credit Union: Alabama Law Enforcement CU, Birmingham, Ala.
Assets: $10.4 million
Members: 1,752
Year Chartered: 1939
Date of Member Vote:
Acquiring Credit Union: Jefferson Credit Union, Hoover, Ala.
Assets: $83.3 million
Members: 6,858
In a fill-in-the-blanks disclosure form, Alabama Law Enforcement CU cited more products and services, three additional branches, online banking and community involvement as a reason to vote in favor.
ALECU had a $212,473 loss during 2024, with capital at 9.98%. Jefferson CU posted $33,421 in net income and had net worth of 9.70% as of year-end.