COLUMBUS, Ohio.–The CU Daily’s newest review of review of credit unions and mergers finds a unique pricing offer, some unusual features, one CU paying out $600,000 to members, along with bonuses for management; small CUs finding it “harder to compete”; and even E Malama Makou.
This is the second in a series 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.
The first part 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.
SMART CU Paying Out $600K; 5 Execs See Merger-Related Comp
Merging Credit Union: SMART FCU, Columbus, Ohio
Assets: $34.92 million
Members: 2,883
Year Chartered: 1952
Date of Member Vote: Sept. 26
Acquiring Credit Union: Pathways Financial, Columbus, Ohio
Assets: $632.9 million
Members: 49,896
“This strategic merger will result in members of SMART gaining access to many new products and services and enhanced electronic access to their credit union membership accounts. Members will also gain additional full service branch access, as the combined credit union offer up to 11 full-service branches,” SCU told members. Pathways will be delivering a comprehensive digital experience for SMART members. Pathways has the resources to improve account management with the latest technologies, including a full service online access program with bill pay, mobile check deposit, mobile account access, pay anyone payments, text alerts, 24/7 online loan application solutions, and more.”
SMART CU also said the two credit unions “share similar philosophies” and that all employees would be retained.
Although its net worth was lower than that of the acquiring Pathways Financial, SMART CU said it would distribute $600,000 as part of a special dividend, with a minimum of $20 and a maximum of $5,000 per member.
Merger-Related Comp
Five SMART CU executives were to receive merger-related compensation, including:
- CEO Jodi Henricks, $36,760
- CFO Scott Brown, $32,616
- COO Jesi Daniel, $31,384
- Lending & Member Service Manager Derek Wendt, $28,952
- MSR/BSA Audra Maxwell, $29,430
At mid-year, SMART FCU posted $56,168 in net income to go with net worth of 10.66%. Pathways Financial posted $511,529 in net income and capital of 10.64% as of June 30.
A Unique Combination in North Carolina
Merging Credit Union: Civic FCU, Raleigh, N.C.
Assets: $119.2 million
Members: 7,678
Year Chartered: 2017
Date of Member Vote: Sept. 27
Acquiring Credit Union: Local Government FCU, Raleigh, N.C.
Assets: $3.96 billion
Members: 407,174
Local Government Federal Credit Union of Raleigh, N.C., has had interesting relationships with two other credit unions in town. Local Government FCU has long operated under the wings of the mammoth State Employees’ Credit Union (SECU). Under the merger proposal, the relatively new Civic FCU is merging into LGFCU, but it is the former’s name and branding that is the survivor.
In its message to members, Civic FCU said the merger was desirable because it will “expand services to the membership, enable a more unified focus on local government, provide greater stability of both credit unions through consolidation benefit from economies of scale to offer more resources, and provide industry-leading mobile banking, digital services and account features.”
Specifically, it also provided a 27-point bullet list of benefits it said the merger would provide.
The credit unions said both of their main offices would remain open.
As of mid-year 2024, Civic FCU had posted a loss of $122,318, with capital of 7.86%. LGFCU has $9.226 million in net income and net worth of 9.24% as of the same date.
‘E Malama Makou ‘ia ‘Oe’ Cited as Reason to Merge
Merging Credit Union: HMSA Employees FCU, Honolulu
Assets: $59.9 million
Members: 2,914
Year Chartered: 1961
Date of Member Vote: Oct. 15
Acquiring Credit Union: Hawaii State FCU, Honolulu
Assets: $2.4 billion
Members: 129,059
In urging its members to vote in favor of combining with Hawaii State FCU, HMSA Employees FCU said a merger would provide “more innovative services, greater convenience, additional digital channels, greater data security” and more branches.
It further cited “increased regulatory pressures” and the cost of cybersecurity as affecting its ability to compete.
In addition, HMSAEFCU said its philosophy of “E Malama Makou ‘ia ‘Oe (We Care About You” aligns with HSFCU’s philosophy of “Always Right by You.”
Despite high capital, HMSA Employees said there would be no distribution of net worth because its assets “primarily consist of investment securities with a significant unrealized loss ($5.8 million). On the merger date, these securities will be marked to market, negatively impacting GAAP net worth.”
HMSA Employees reported a loss of $221,555 as of mid-2024, with net worth at 15.16%. Hawaii State had $12.88 million in net income and net worth of 9.34% as of the same date.
‘Complementary and Overlapping’ Missions are Cited
Merging Credit Union: MUNA FCU, Meridian, Miss.
Assets: $51.8 million
Members: 6,294
Year Chartered: 1962
Date of Member Vote: Oct. 15
Acquiring Credit Union: Singing River FCU, Moss Point, Miss.
Assets: $318.5 million
Members: 23,886
“The mission of MUNA and Singing River are complementary and overlapping,” MFCU told members. “For almost 100 years, each institution has delivered outstanding service and outcomes for respective members, employees and the communities they serve. The central motivation for this merger is the fiscal strength, safety and soundness of the combined entity, while positioning to serve members evolving needs and expectations in light of technological advances that threaten the credit union model. The expanded and diversified balance sheet and membership composition will reduce financial and membership concentration risk and allow us to increase technological investments to better serve you while maintaining values rooted in our local communities.”
MUNA FCU has $159,498 in net income through mid-year, with capital at 12.76%. Singing River posted $1.62 million in net income to go with capital of 11.29%.
Prospecting for a Partner, Members are Offered a Number of Unusual Pricing Offers
Merging Credit Union: Prospectors FCU, Diamond Bar, Calif.
Assets: $100.6 million
Members: 5,262
Year Chartered: 1949
Date of Member Vote: Oct. 16
Acquiring Credit Union: Certified FCU, El Monte, Calif.
Assets: $787.8 million
Members: 58,108
A merger, Prospectors FCU told members, would allow for a “consolidation of energies and resources,” and would provide more branches and free-free ATMs; a wider variety of services, especially online banking and bill pay; and provide greater economies of scale. It said all staff would be retained and one member of the PFCU board would become director emeritus on the Certified FCU board for one year after the merger was completed.
Unusual Features
The Prospectors FCU/Certified FCU merger included some unusual features, 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.
Bonuses for Management, Employees
Comp for Management
PFCU reported the merger deal included merger-related compensation for management and employees. Among those receiving such bonus comp were:
- PFCU CEO Debra Berrera was to become VP-strategic initiatives with the combined operation through Dec. 31, 2027, and would receive severance with a maximum potential amount of $860,000 if her employment were terminated prior to that date due to death, disability or not fur cause. “The potential severance amount naturally diminishes through the term of employment,” the CU’s disclosure form stated.
- Four people, Eva Rueda, who headed marketing/IT/special projects; VP-Lending Denise Thibault; Controller Rose Jauregui, and VP-operations Brenda DeAnda were to receive one-time retention bonuses of $22,000.
Prospectors FCU posted $29,233 in net income through June 30, 2024, with capital of 9.81%. Certified FCU had $4.83 million in net income and net worth of 20.61% as of the same date.
Money-Losing Illinois CCU Among Those Merging Into Credit Union 1
Merging Credit Union: Illinois Community CU, Sycamore, Ill.
Assets: $120.2 million
Members: 11,180
Year Chartered: 1935
Date of Member Vote:
Acquiring Credit Union: Credit Union 1, Lombard, Ill.
Assets: $1.87 billion
Members: 121,674
Illinois Community CU is one of many CUs that are merging or that have merged into Credit Union 1. The NCUA database at the time of this reporting provided an error message when attempting to access the statement made by Illinois Community CU to members.
ICCU reported a loss of $241,418 as of mid-year 2024, with capital at 11.62%. Credit Union 1 had $3.269 million in net income and capital of 10.15% as of the same date.
A Big Combination in Illinois; Management Gets Payout
Merging Credit Union: Kane County Teachers CU, Elgin, Ill.
Assets: $455 million
Members: 29,940
Year Chartered: 1937
Date of Member Vote:
Acquiring Credit Union: Consumers Credit Union, Lake Forest, Ill.
Assets: $3.5 billion
Members: 226,273
In its message to members, Kane County Teachers told members they would benefit from a merger due to expanded products and services, more locations, access to better technology, improved economies of scale, better rates, increased workforce talent pool, and more branches. All employees would be retained and there would be no merger-related retirements, KCTCU said.
Exec Compensation
While there would be no distribution of net worth, Kane County Teachers said members of its management team would receive merger-related compensation, including:
- President and CEO Michael R. Lee, who would become president emeritus of the merged CU and whose compensation would “decrease significantly,” according to KCTCU. Lee was to receive an employment contract running through Dec. 31, 2026 and was to be compensated “unless employment is terminated by the employer for cause or by the employee without good reason.”
- EVP Joesph Menolascino was to become VP of profitability and analytics and could see a short-term incentive package increase of up to $52,984 and a long term incentive package worth up to $74,598.
- SVP Sergio Rodriguez was to become the VP of technology and innovation with the continuing CU and would see a salary increase of $14,599, along with a short-term incentive package increase of up to $53,925 and a long term incentive package worth up to $62,136.
- VP-Operations Benjamin Bernal received as a retention benefit a split-dollar agreement funded by the credit union with $284,194.
- Based on what it said was its “financial performance” in the 10 years ending in 2023, all employees with at least one year of service received a bonus, KCTFCU said. That included Menolascino, $37,565; Rodriguez, $30,095; VP-Finance Jeremy Shipley ($24,579) and Bernal, $18,200. In addition, CEO Lee received a $45,000 bonus in “anticipation of his retirement, which was approximately $20,000 less than if he had participated in the program,” the credit union said.
Kane County Teachers, whose deposits are insured by American Share Insurance, posted $3.1 million in net income at mid-year 2024, with capital of approximately 8.8%. Consumers CU had $4.96 million in net income and net income of 9.06% as of the same date.
Balance Sheet Provided to Members Ahead of Vote
Merging Credit Union: Valley Hills FCU, San Bernardino, Calif.
Assets: $3.78 million
Members: 388
Year Chartered: 1967
Date of Member Vote: Oct. 17
Acquiring Credit Union: Arrowhead Central CU, Rancho Cucamonga, Calif.
Assets: $2.37 billion
Members: 209,023
In a disclosure that included an overview of the balance sheet of the two institutions, Valley Hills CU told members the benefits of merging included a wider variety of competitive services and products, additional checking accounts, 19 branch locations, instant issue card printing at all branches, enhanced ATMs, enhanced online banking, mobile payments and more.
Valley Hills had $5,152 in net income through the first half of 2024, with capital of 16.54% (there was to be no capital distribution). Arrowhead Central had $9.64 million in in net income and net worth of 11.34%
Another Small CU Says ‘We’re Finding it Hard to Compete’
Merging Credit Union: Latvian Heritage CU, Grand Rapids, Mich.
Assets: $3.08 million
Members: 332
Year Chartered: 1963
Date of Member Vote: Oct. 20
Acquiring Credit Union: Ignite Credit Union, Battle Creek, Mich.
Assets: $154.3 million
Members: 13,894
Latvian Heritage CU told members it is “finding it hard to compete in today’s highly regulated, high-tech environment. The costs of technology and regulations have made it difficult for the credit union to provide its members with all of the products and services that larger credit unions can provide.”
A merger would not just make it more competitive, but expand the field of membership, LHCU said.
Latvian Heritage reported $13,531 in net income as of June 30, 2024, with net worth of 17.93% (it did not indicate any plans for a capital distribution). Ignite CU posted a $1.529 million loss as of the same date, with net worth of 11.57%.
A Healthcare CU Looks for a Cure With Postal CU
Merging Credit Union: T.E.S. Regional Healthcare FCU, Shreveport, La.
Assets: $25.1 million
Members: 1,546
Year Chartered: 1957
Date of Member Vote: Oct. 22, 2024
Acquiring Credit Union: Post Office Employees FCU, Shreveport, La.
Assets: $35.7 million
Members: 3,520
In the NCUA database, the member disclosure form that appears for T.E.S. Regional Healthcare FCU is actually that of APS FCU in Charleroi, Penn., which is involved in a separate merger.
T.E.S. Regional Healthcare FCU had $12,821 in net income and capital of 12.58% as of mid-year 2024. POEFCU had $132,470 in net income and 11.11% in capital as of the same date.
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