BEAVER FALLS, Penn.–.A lack of staffing, capital at double the level of acquiring CU, merger-related comp for the chairman and more can be found in the latest review of merger proposals CU members have been asked to vote on.
This is the fourth in a series in the CU Daily that examines 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.
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.
With Core Conversion Pending, Lack of Staff is Cited
Merging Credit Union: Beaver Valley FCU, Beaver Falls, Penn.
Assets: $97.9 million
Members: 9,388
Year Chartered: 1942
Date of Member Vote: Nov. 7
Acquiring Credit Union: Clearview FCU, Moon Township, Penn.
Assets: $1.99 billion
Members: 120,211
“The cumulative needs and best interests of the members and employees were the primary goal of the Beaver Valley FCU board of directors and ultimately making the merger decision,” BVFCU told members.” Beaver Valley FCU has a long and successful history of providing quality financial services to their members with a high level of customer service and satisfaction…Beaver Valley FCU also faces a looming core data processing conversion and deficit of resources, namely employees, to maintain the process. Key positions will soon be vacated and attempts to identify replacements have been unsuccessful period this also includes a lack of succession for Beaver Valley FCU’s current CEO.”
BVFCU also cited enhanced services, branches, extended hours and more as reasons to vote for the merger.
While its net worth is 677 basis points higher than that of Clearview FCU, Beaver Valley FCU told members there would be no net worth distribution because of the enhanced services, increased branch access, “ongoing efficiencies and ongoing competitive dividend rates” they would receive, “which offsets the difference in the two credit unions net worth ratios.”
As of Sept. 30, BVFCU had posted $1.45 million in net income, with capital at 17.38%. As of June 30, Clearview reported $13.3 million in net income, with net worth at 9.93%.
With Ongoing Losses, BWFCU Sees a Five-Star Solution
Merging Credit Union: Baltimore Washington FCU, Glen Burnie, Md.
Assets: $8.44 million
Members: 1,469
Year Chartered:1971
Date of Member Vote: Nov. 7
Acquiring Credit Union: Five Star of Maryland FCU, Baltimore
Assets: $57.5 million
Members: 4,929
The struggling Baltimore Washington FCU offered two reasons members should vote in favor of merging:
- Five Star of Maryland will be “financially safe and sound and be able to invest in new products, services and technologies.”
- The BWFCU office will remain open and staff retained.
BWFCU posted a $28,679 loss during the first half of 2024, with capital of 7.93%. Five Star of Maryland had $21,820 in net income and capital of 12.24% as of June 30.
Can No Longer ‘Stand Alone,’ Says Pittsburgh CU
Merging Credit Union: City CO FCU, Pittsburgh, Penn.
Assets: $23.6 million
Members: 4,079
Year Chartered: 1941
Date of Member Vote: Nov. 14
Acquiring Credit Union: Greater Pittsburgh Police FCU, Pittsburgh, Penn.
Assets: $80.5 million
Members: 5,742
“Despite operating as a profitable credit union, City Co Federal Credit Union has recognized the challenges of continuing as a standalone financial institution given the rising interest rate environment and its relatively low capital position,” City C0o FCU told members. “Together, the merged credit unions will be able to provide a wider range of products and services to their members. Additionally, the merged credit unions will achieve the economies of scale which will permit it to better compete in the increasingly competitive financial services industry.”
City Co FCU had $25,945 in net income during the first half of 2024 to go with capital of 7.75%. GPPFCU had $914,342 in net income and net worth of 20.43% as of June 30.
Small NY CU Places B.E.T. On Larger CU That Has Reported Losses
Merging Credit Union: B.E.T. FCU, Yonkers, N.Y.
Assets: $6.39 million
Members: 455
Year Chartered: 1940
Date of Member Vote: Nov. 19
Acquiring Credit Union: Educational & Governmental Employees FCU, Hartsdale, N.Y.
Assets: $54.1 million
Members: 5,744
B.E.T. FCU told members the merger would provide them with more products and services, additional branches, an enhanced website, bill payment services, and access to the Co-op ATM Network as well as to financial wellness programs.
As of Sept. 30, B.E.T. FCU had $7,572 in net income and net worth of 10.35%. Educational & Governmental EFCU, however, had reported a $152,260 loss and net worth of 10.50% as of the same date.
Merging, and Taking a City’s Name With It
Merging Credit Union: La Crosse Burlington CU, La Crosse, Wis.
Assets: $7.79 million
Members: 914
Year Chartered: 1955
Date of Member Vote: Nov. 19
Acquiring Credit Union: Co-op Credit Union, Black River Falls, Wis.
Assets: $539.7 million
Members: 22,384
Using what has become default boilerplate language in many merger disclosure forms, La Crosse Burlington CU told members it needs to merge because it will provide members “access to additional products and services, enhanced technology options, and expanded service locations and hours.”
La Crosse Burlington, which the NCUA database shows was one of five CUs that had La Crosse in their names at one point (there will now be none), had $50,331 in net income through June 30, 2024, with capital of 13.11%.
Double the Capital of Acquiring CU, But No Payout
Merging Credit Union: Cabot Boston Credit Union, Boston
Assets: $5.63 million
Members: 702
Year Chartered: 1941
Date of Member Vote: Nov. 21
Acquiring Credit Union: Merrimack Valley CU, Lawrence, Mass.
Assets: $2.2 billion
Members: 116,583
Cabot Boston CU’s board told members that “both CBCU and MVCU are, measured in financial terms, relatively small in comparison to competing financial institutions. CBC U’s modest resources limit its ability to invest in technology and other services that members increasingly demand. Combining CBCU and MVCU will deliver to our members a greater level of member service through a larger branch network and a broader array of better products and services…”
Cabot Boston said its office would remain open pending the OK from its sponsor company, Cabot Corp., and that there would be no staff reductions.
Although CBCU’s net worth is nearly double that of Merrimack Valley at the time members were informed of the merger (17.67% vs. 9.92%), Cabot Boston said there would be no capital distribution because it would “not be able to obtain sufficient growth on a standalone basis to project a valuation that warrants an adjustment in shares.”
Cabot Boston CU reported a loss of $41,523 as of June 30. MVCU had $4.6 million in net income and net worth of 9.92% as of the same date.
‘Challenges’ of Going It Alone Are Cited
Merging Credit Union: Cities Credit Union, Vadnais Heights, Minn.
Assets: $33.9 million
Members: 2,296
Year Chartered: 1936
Date of Member Vote: Nov. 26
Acquiring Credit Union: Minnco CU, Cambridge, Minn.
Assets: $521.9 million
Members: 33,493
Like numerous other CUs seeking to merge, Cities CU told members it has “recognized the challenges of continuing as a standalone financial institution in today’s economy, the challenging interest rate environment we are in and the increased competition in the financial services industry. Together, the continuing credit union will be able to provide a wider range of products and services with added locations to better serve the membership.”
Cities CU said its president and CEO, Michael Enright, would continue on in a role following the merger, and staff would be retained.
Related to the merger, the CU said Enright would be eligible to receive $17,150.52 for unused leave time, and that VP Kristine Heuer would be eligible to receive $23,401.68 for the same reason.
Cities CU lost $16,734 through the first half of 2024, with net worth of 7.85%. Minnco CU reported $1.65 million in net income and net worth of 9.75% as of the same date.
In the Heartland, Money-Losing CU Seeks a Tie-Up
Merging Credit Union: Heartland Area Credit Union, Omaha
Assets: $27.4 million
Members: 2,209
Year Chartered: 1954
Date of Member Vote: Nov. 26
Acquiring Credit Union: Omaha FCU, Omaha
Assets: $85.8 million
Members: 6,250
Heartland Credit Union told members the merger would provide them with expanded products, higher savings and certificate rates, lower loan rates, additional branches in multiple counties, and more staff.
Heartland Area CU showed a $229,583 loss through the first six months of 2024, with net worth at 19.85% (it said there would be no capital distribution). Omaha FCU had $522,204 in net income and net worth of 10.99% as of the same date.
A Merger Proposal That Crosses State Lines
Merging Credit Union: Tri State Area FCU, Hoosick Falls, N.Y.
Assets: $42.1 million
Members: 4,220
Year Chartered: 1953
Date of Member Vote: Dec. 2
Acquiring Credit Union: Heritage Family FCU, Rutland, Vt.
Assets: $747.1 million
Members: 50,421
Although the merger crosses state lines, TriState Area FCU and Heritage Family FCU are just an hour apart.
Tri State told members it needs to merge in order to provide more services additional products, enhanced convenience and to lower operating costs.
Tri State Area FCU had $64,295 in net income during the first half of 2024, with net worth of 8.88%. Heritage Family FCU posted $3.2 million in net income and net worth of 11.42% as of June 30.
In Addition to Payout for Execs, Board Chair Also to Receive Comp
Merging Credit Union: Nextmark FCU, Fairfax, Va.
Assets:$521.7 million
Members: 16,512
Year Chartered: 1958
Date of Member Vote: Dec. 3
Acquiring Credit Union: Apple FCU, Fairfax, Va.
Assets: $4.49 billion
Members: 250,857
The merger of these two large, Northern Virginia CU pushed overall assets to more than $5 billion.
In urging members to vote in favor, NextMark FCU said the combination would allow “ for a consolidation of energies and resources of the two credit unions to better serve the members in a competitive and secure environment.”
It offered a 10 bullet point list of benefits, including:
- A :more robust product and service line: and the ability to “return more value.”
- Stability and security
- More responsive to evolving financial needs
- Enhanced electronic banking products
- More branch locations (25)
- Same knowledgeable, friendly employees
- Continued support for CU partners, including the African American CU Coalition, the Fairfax County Retired Employee Association, the Global Women’s Leadership Network, and the Worldwide CU Foundation for three years following the merger.
- Up to two members of NextMark FCU board to serve on combined CU’s board
- NextMark FCU President/CEO Joe Thomas to serve as executive president following the merger
Payout for Members
NextMark FCU said it would distribute some of its net worth to members in the event the merger was approved, saying it would pay out an amount mot to exceed $12 million (split between members with loans and shares) and representing 25% of each eligible member’s loan interest paid in 2023 and approximately 100% of each eligible member’s share dividends earned in 2023, “provide such amount does not reduce the Apple FCU’s post-merger net worth ratio to fall below 10%.
Payouts for Exec Team, Board Member
The merger agreement also calls for payouts to members of NextMark’s management team, including:
- CEO Joe Thomas, a maximum amount of $157,511.68
- CFO Brian Shostek, a maximum amount of $174,719.03
- CLO William Cook, a maximum amount of $101,374.85
- COO Jennifer Fox, a maximum amount of $213,929.02
- Chief HR Officer Corlyss Cigler, a maximum amount of $216,965.38
- Board Chair Bobbie Deegan, a maximum amount of $10,142.71.
NextMark FCU reported $2.25 million in net income during the first six months of 2024, with net worth of 15.75%. Apple FCU reported $16.1 million in net income and net worth of 10.18%.