LEVITTOWN, Penn.–In a rare occurrence, members of the $70-million Spirit Financial Credit Union in Pennsylvania have voted against merging into the $2.2-billion, Lombard, Ill.-based Credit Union 1. Had the merger been approved it would have meant a more than $4-million payout to its CEO, as the CU Daily reported here.
“We respect the decision our members made through this vote,” Spirit Financial CU CEO David Obarowski said in a statement to the Philadelphia Inquirer. Obarowski, who thanked members for voting, added, “There are no plans for another vote on this specific matter. Spirit Financial will continue operating independently.”
Todd Gunderson, Credit Union 1’s CEO, said in a statement that he had “utmost respect” for “the democratic member voter outcome.”
Gunderson told the Inquirer that most members voted in advance by mail and that a smaller group showed up in person on Monday to engage with him and Obarowski. Gunderson described that dialogue to the Inquirer as “constructive, thoughtful and respectful” and rightly focused on adding younger members. He noted that Spirit Financial’s member count has barely risen since the 1990s.
Spirit Financial has approximately 3,800 members.
Large Turnout of Members Reported
Obarowski declined to provide the vote totals, but the Inquirer said Richard Kilian, a building-materials company owner who opposed the merger, said more than 500 of the credit union’s 3,800 members voted, with more than 400 voting no, according to a count he said was made public at the member meeting.
As the CU Daily has been regularly reporting, Credit Union 1 is among the most aggressive credit unions in the country in merging in other, typically smaller credit unions. Gunderson told the Inquirer earlier that his credit union had won 12 of 13 merger votes since he took the top job in 2020.
Kilian told the Inquirer the vote reflected members’ preference for local control, though he agreed its aging membership needs new energy.
Chartered in 1953, Spirit Financial was started by workers at the former U.S. Steel Fairless Works but is now open to people who live or work in Bucks or are members of Bucks-based churches and other institutions.
Payouts to Management
As the CU Daily earlier reported here as part of its industry-leading coverage of mergers in credit unions, the proposed combination of Spirit Financial and Credit Union 1 would have included pay packages for top Spirit Financial leadership, but no payout to members.
Those payouts were to include:
- CEO David Obarowski, who was to receive a merger-related retention incentive of $200,000, along with continue employment for five years with an annual pay increase of $57,381. He will also be eligible to receive a performance-based incentive ranging from $1 to up $50,000 “for each merger partner he successfully helps attract and integrates into the Continuing Credit Union,” the statement filed with NCUA reads. In addition, Spirit Financial said Obarowski’s previously established SERP would become fully vested and valued at $3 million, with $150,000 to be paid annually over a 20-year period.
- Compliance Officer Melanie Cobb was to see an annual pay increase of $7,404.80 and receive a retention bonus of $6,177,60
- Collection Manager Sharon McCullough was to receive an annual pay increase of $10,431.20 and a retention bonus of $5,980.
- Branch Manager Michelle Tirendi was to receive an annual salary increase of $18,173 and a retention bonus of $5,262.40.
- Loan Officer Sarah Nagle is to receive an annual pay increase of $6,626.88 and a retention bonus of $5,399.68.
Spirit Financial CU told members there would be no distribution of net worth because they will be offered a “host of updated services an options with the Continuing Credit Union that Spirit Financial Credit Union is unable to provide in this economic environment.”
‘Urgent Public Questions’
The proposed Spirit Financial/Credit Union 1 merger had received some national scrutiny in both local media and from Chip Filson, the well-known former executive with NCUA and Callahan & Associates, who challenged the merger and said it raised “urgent public questions.”
Filson had said on his blog that the merger would mean the members would be losing out on nearly $9-million in “community built capital,” while the CEO will receive more than $4.4-million in payments and benefits.
Spirit Financial CU had $365,128 in net income through Sept. 30, with net worth of 13.18%. Credit Union 1 had net income of $4.6 million and net worth of 11.04% as of the same date.
“Spirit Financial isn’t struggling — it is thriving,” wrote Filson, noting the $69-million credit union is highly capitalized, financially stable, outperforming peers, and the only locally headquartered depository institution serving Levittown. “Yet in a quiet, opaque merger, every dollar of the members’ accumulated equity of approximately $9 million will be transferred to an out-of-state institution for free.”
Filson noted that while there was a large payout to management, there was to be:
- No payouts to Spirit Financial member-owners
- No equity retention
- No bonus dividend
Member Objection
On the NCUA website where credit unions proposing mergers must disclose their reasons for seeking to do so, one member of Spirit Financial posted a comment stating: “I am voting against the proposed merger of Spirit Financial Credit Union With Credit Union 1. Credit Union 1 is based in Lombard, Illinois. All of its branches are in Illinois. There is no advantage to the Spirit Credit Union member to merge with Credit Union 1. Merging with Credit Union 1 would take away the local Bucks County focus of Spirit Financial Credit Union, which should be its mission of Spirit Financial Credit Union would want to merge with another local Bucks County credit union, I would be in favor of that merger.”
One Response
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