A Member and a CEO React to Merger Events

A member of Xceed found my post from 2020 on that credit union’s merger with Kinecta.

Reading the analysis from Should a CEO’s Last Act Be Merger, he posted a comment:

Thank you for your article.  It is right on point.  As a member of XFCU since 1982, I have seen this organization decline at an alarming rate.  Now that that the merger has taken place, I am still waiting to see the additional value I am to receive from this merger.  XFCU began its fall when it closed the Texas operations.  Today, we have no personal service, personal bankers, investment opportunity, or competitive products.  Teresa Freeborn has been the only person who benefited from the merger.  I voted against the merger since I believe she participated in the merger with a conflict of interest.  

I submitted questions to her on service to members not on the East or West Coast.  This merger has so far shown me no benefit.  I moved my business account to BOA.  As other investments matured, I moved them to Fidelity and Merrill Edge.   As a 40-year customer, I expect to move all accounts by the end of the year to BOA.  Communication is terrible.  The XFCU Officers and Board have failed all members of this organization.

In October, prior to the merger vote, he sent Xceed an email asking for more information:

Subject: XFCU / Service to Members outside of California and New York

Good Morning:

Member since 1981.  Since closing the Texas Branch, service and communication has gone down to a level that I now question whether XFCU remains an option for me.  What services will be available to me in Texas through any CU affiliations that allows me to make deposits, withdrawals locally if needed. 

I was never advised of this merger and am a very disappointed longtime customer.

Thank you,

He told me: “I never got a response.”

When I asked what his credit union experience had been he wrote:

I am a retired Insurance Executive who worked for Crum & Forster Insurance acquired by Xerox in 1980’s.  I was recently a Senior Vice President at McGriff, a BB&T Company, now Truist.   

During my working career, XFCU was an important part of my personal financial success.  I bought several homes and cars.  Today, if I needed financial help, I wouldn’t know where to start at XFCU.  I don’t recommend CU to my kids any longer as I question their viability in today’s economic challenges.

Xceed’s First Quarter Financial Results

The combination with Kinecta had not been completed as of the March 31, 2021 call report.

In the first three months Xceed reported the following:  a loss of $2.1 million (ROA of  -.87), a 22% drop in loans ($146 million), 11% share growth, 112% operating expense/total income ratio, net worth of 11%, a 9.2% decline in members and 19% fewer employees (35 out of 185 have left) both compared with one year earlier. The writer is not alone in seeing difficulty.

Kinecta reports positive ROA of .70% and a net worth of 7.8% in the same first quarter.

One observer commented on the two credit union’s longer term track records: “it looks like two rocks  being tied together and tossed into a lake to see if they can float.”

But the members are already bailing out.   Unfortunately, it is they who will suffer the loss of value as the writer detailed in his experience above.

A Different Decision: A CEO Closes a Merger Conversation

In talking with a CEO of a $2.0 billion credit union, I asked if he had ever discussed a merger, especially with a much larger firm in his market area.  The two were intertwined and competed directly.

He said yes, the topic had come up.  Both had grown at the same rate, both had sound performance.   But he didn’t pursue the option.

This non-merger had produced a very beneficial result.  In his assessment: “Our competition keeps the entire market for consumers honest because we price against each other.”

In this case two separate, strong, competing credit unions are helping all consumers “stay afloat.”