By Frank J. Diekmann

Perhaps what is really the most mystifying thing after having read through approximately 90 credit union merger applications isn’t what was shared in all of those disclosure forms, it’s the response that has come after the reporting. 

The CU Daily recently concluded publishing a nine-part series on the latest merger disclosures filed by credit unions over the last half of 2024. Afterward, I received the kind of feedback I always receive after sharing with credit unions what other CUs are telling their members when they want them to vote in favor of tying up with another. I get articulate and often passionate emails, heartfelt messages on LinkedIn, and even phone calls lamenting the merger trend, with callers and emailers often venting over the questionable reasons cited or what members are being told or how much of other people’s money some executives—and even board members–are putting in their pockets on the way out the door. 

And what kind of firm flag-waving, save-the-CU-world conviction to do something about it pours passionately from the mouths of those who say action needs to be taken ? Meh. Whattaya gonna do?, they more or less say with a shrug I can even feel through the email.  Yeah, they agree, it’s not right in some cases, but it’s up to the members, right? Right?

Right and Wrong

And the response to that is yeah, right and wrong. That’s because the members are completely dependent upon information provided to them by other people with vested interests, other people whom they have trusted.

And let’s be clear—I’m not implying that all members are being misled. There are often legitimate reasons why a merger is the best option. And you can feel the passion and regret of some credit unions as they try to explain how they have done all they can, but just can’t make a go of it. Others provide long detailed reasons for merging and, in the best of cases, return excess capital to the people who own it. 

All of that is the right part.

The Wrong Part

And then there is the wrong. The vague claims about “more products and services” and “better rates.” The big payouts for some management teams and nothing for the members. Whopping amounts of net worth just being transferred to the acquiring CU. And relatedly, a question that is never answered: if you’re lamenting you just couldn’t offer certain products and services, why didn’t you tap into some of your deep pile of capital? 

Also related, and a question I wish I could ask of many CUs: where in the world has the board been over the last few years or decade?

All that said, if you missed some in the series in the CU Daily, below is some of what struck me from our reporting. 

The Ramblin’ Wreck from Tech

I hope you’re sitting when I reveal this, but numerous CUs say they just can’t foot the bill for technology. 

• “Mason County School Employees Credit Union is finding it hard to compete in today’s highly regulated, high-tech environment,” the credit union told members. 
• Latvian Heritage CU told members it is “finding it hard to compete in today’s highly regulated, high-tech environment.”
• Similarly, Knoll Employees CU said–have you heard these words before?–it is “finding it hard to compete in today’s highly regulated, high-tech environment.”
• Bloom Credit Union told members it is a “financially strong credit union serving its members and does not need to merge to survive.” And then it added, “However, in today’s high-tech environment…” You know how that ends.

Management Problems

Nearly as ubiquitous as references to tech challenges are challenges related to management.

Teamsters Credit Union, for example, said it was seeking to merge because it lacks the financial wherewithal to “hire effective management” to serve members in the way they “deserve.”

Kennametal Orwell FCU said its board was recommending the merger because the “current manager of the credit union is ready to retire and she is the sole employee of the credit union.” And really, who could have ever envisioned that would have been a succession issue?

Big Bethel A.M.E. Church FCU in Atlanta said it “continues to see a rise in the time requirements to appropriately manage the credit union while balancing with their personal time commitments. The board is unable to continue with the time commitment and are unable to find replacements with the appropriate experience and ability to devote sufficient time to running the institution.”

‘Only a Matter of Time’

Empty board seats also show up on other disclosure forms filed with NCUA. 

Valley Wide of PA FCU, for instance, said, “With our aging board and my approaching retirement, it is the right time to merge our credit union,” wrote Matthew G. Huet, CEO/director of Valley Wide of PA FCU. Huet added that the trendlines for VWPAFCU weren’t good, writing, “Without a drastic change, it will be only a matter of time before NCUA (our regulator) forces us to merge or close our doors.”

Watsonville Hospital FCU told its members it has been “operating at a net loss with less than necessary volunteer participation for many years.”

In a one-sentence explanation of why it needs to merge, Lewiston Porter FCU told members, “…The proposed merger is desirable and in the best interests of members because our credit union CEO will be retiring in 2025 and our assets will be decreasing in the coming years due to the aging of our membership.” 

Combo Challenge

Combining both technology and staffing problems as reasons for merging, Beaver Valley FCU said it faces a looming core data processing conversion and has deficit of resources, namely employees, to maintain the process.

“Key positions will soon be vacated and attempts to identify replacements have been unsuccessful. This also includes a lack of succession for Beaver Valley FCU’s current CEO,” the credit union stated. 

A Capital Argument

If you want to put a little spark into your next get-together with your peers in Credit Union Land, you could talk politics—but if that’s just too tame for you, steer the conversation tp the question of who a CU’s capital belongs to. 

Because if there’s one thing credit unions’ disclosure forms make clear, no one agrees. It’s the member’s capital. Give it up, Philosophy Phil–it’s the credit union’s capital, as it was built up over decades. Wrong, it belongs to management and the board (I’d like to be there when you argue this one). Sorry, but you’re all mistaken—it should transfer to the acquiring CU to cover the costs involved in the integration.  

If you haven’t figured it out, for the most part I fall into the “it belongs to the members” camp. Sorry, but you can’t refer to the “member-owners” and then also say they don’t own at least a piece of the net worth. In cases where the capital of the two merging CUs is roughly equal, then it should transfer. But in many combos, the capital of each CU is like a dumbbell with a bowling ball on one end and a ping pong ball on the other.

It’s not unusual to encounter credit unions with capital north of 20%, 30% and, in some cases, even 40% merging into CUs with capital right around 8-10%. That’s just a gift to the acquiring CU. 

Going Postal

Case in point: Pine Bluff Postal Credit Union, which had 48.24% capital. It offered no distribution to its 74 members. 

And what is it about CUs serving the Post Office? Postal Employees Regional FCU had a whopping 46.92% net worth ratio, but said there would be no distribution because of the costs the acquiring Navigant Credit Union will incur related to the merger, explaining, “Because the board believes the benefits our members will receive by becoming Navigant Credit Union members far exceeds a one-time dividend.” 

Losses, But a Payout

Family 1^st of Texas, meanwhile, which had net worth below 7%, said that obviously there would be no capital distribution to members, but it did list five members of management who were to receive merger-related compensation.

Some credit unions do it right. They give back the excess. But many don’t, and the people who own that net worth never know what they didn’t get.

Other Examples

Here are some examples of what other CUs have done:

• Although Cabot Boston CU in Boston had net worth is nearly double that of the acquiring Merrimack Valley CU  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.” 
• Nextmark CU said it would distribute some of its net worth to members in the event it merger was approved, saying it would pay out an amount not to exceed $12 million. It also paid more than $800,000 out to five members of management.

A Payout to Board Members

Texas Telcom CU in Dallas said that while there would be no distribution of its near 16% net worth to members or any other payment, seven members of the board said they would be taking home  an “appreciation award” of $9,999 each. 

The credit union’s CEO, Pam Toler, was paid $400,000 in severance/retirement.

Meanwhile, at the same time it was announcing the payout, Texas Telcom reported a loss of $131,314 as of mid-year 2024, with net worth of 15.93%.

I know the regulators will say this isn’t their job, but really?

So, What’s the Mission?

Many credit unions will make some reference to the merger partner being ideal because they have “overlapping missions” or “common philosophies.” I wonder how many members really know what their own CU’s mission is—or that it even has one. This might be a good time to share this with your members–not to mention your employees. 

Then there was one CU’s vague references to the ability to “accelerate our purpose-driving mission to become the leader in fostering financial wellness for our members.” What does that word salad really mean to the average person? How about just saying, “We exist to make your financial life better?”

I guess the PR firm doesn’t get paid for that. Or maybe they just used ChatGPT.

A Throwback

In the high-tech, app-driven world of financial services delivery today, the merger disclosures still open a window on what were common CU practices in the past. For instance, the $10.3-million C S P Employees FCU said a merger will allow it to improve turnaround on loans, stating, “No more waiting a week for loan committee decisions.”

Hey, that’s our loan committee over there standing next to the cigarette machine while they wait on a fax.

Shining the Apple(tree)

I always love a good basic credit union name that’s brandable and simple and powerful, and hate to see them disappear in a merger. So, a tip of that cap to Appletree Credit Union in Wisconsin, which is merging with Michigan-based Advia CU.

Appletree CU told its members, “Intelligent automation, immersive digitization, artificial intelligence, blockchain integration and tokenization, embedded financial services and open banking are only a few of what will soon become member expectations, especially for the emerging generation of members.”

It also noted its current core provider planned to sunset its platform this year.

To its credit, Appletree went out with a shine, sharing that it would return a portion of its much higher net worth ratio (27.47% vs. 10.74% at Advia at the time of the announcement) and will distribute more than $20 million back to members, with a minimum payment to members of $250 and a maximum of $25,000, depending on account balance.

Creative Payout

Prospectors FCU (which merged into Certified FCU) offered some unusual features in its distribution,, including:

• A 50-basis point discount on new closed-end consumer loans and a 25 basis point discount on first or second real estate loans for members of Prospectors FCU during the six months following the merger date.
• An increase in the rate paid on PFCU certificates if the rate being paid by Certified FCU was higher, for the remainder of the term. In addition, a special 25 basis point bonus was to be added for any new non-CU funds for the first six months after the merger date.
• A successful vote for the merger would lead to $1.1 million in total being distributed to eligible members’ share and certificate balances overall, which would represent a 1.59% adjustment, according to Prospectors FCU.

Other Odds & Ends Observations

• Purity Dairies EFCU reported $15,528 in net income in net income as of mid-year 2024, with capital of 23.9% (it did not indicate any plan to return surplus capital to members).  Although 10 times larger, the CU that it is merging into, Outreach CU, was only slightly more profitable as of June 30, reporting $21,834 in net income to go with capital of 11.4%.
• Mergers across state lines are increasingly common, as are long-distance tie-ups, sometimes of more than 1,000 miles, such as ACU in Abilene, Texas merging into University CU in Los Angeles.
• Another unique name on its way out: Fort Smith Dixie Cup FCU.
• Credit Union 1 CU in Lombard, Ill. is hoovering up numerous CUs. The acquired CUs all use the same cut-and-paste language in their disclosures to members.
• And speaking of a unique name, how about one that was so nice they used it twice: Credit Union Advantage Credit Union in Southfield, Mich. is being merged out. 

Read All About It

How to read all about it.

If you’re saying to yourself right now, Frank, I’m going to ignore my family and career and I would like to read all those merger disclosures at once, then you’re in luck:

• 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.
• Part VIII can be found here.

And after you get done reading all that, let me know what you think. Someone will speak up, right?

Frank J. Diekmann is cooperator in chief at The CU Daily. He can be reached at [email protected].