It has been said, “Where nothing is forbidden, nothing is required.” Impulse control is certainly a valuable skill for all adolescents to learn.
But for a leader with fiduciary responsibility for common wealth, held for tens of thousands of members to benefit their financial futures, it is essential for sound judgment. Sometimes this responsibility underwrites actions that suggest little accountability to the member-owners.
Yesterday REV FCU, Charleston SC, announced the purchase of the 110 year old First Neighborhood Bank, a $152 million, three-branch firm headquartered in Spenser West Virginia. The privately owned bank reported $556,000 in 2023 net income and $12 million in total capital.
REV CEO Jason Lee in a CU Today article said ”I’m excited to bring this mission of growth with purpose to West Virginia and enhance our ability to serve the financial needs of this region.” The article pointed out the two institutions are 520 miles apart. No terms were announced.
How this unknown cash outlay of tens of millions of member reserves to the bank’s owners will benefit REV members is not stated. The rhetoric and unrelated information provided in the article, leads one to be skeptical that this action benefits them in any way. With 14.5% net worth, REV has accumulated member reserves almost 50% greater than required. Is this surplus just burning a hole in this CEO’s pocket?
A Retired CEO’s Message
The strained rhetorical justifications of these serendipitous credit union purchases of bank has led some former leaders to question whether there is any meaningful belief in cooperative design. Have some of today’s coops just become private, tax-exempt firms using their growing financial resources to fulfill personal ambition?
Following is one lament, from a very successful former CEO who recently wrote:
“I mentioned to you once a quote that “all symphonies remain unfinished.” I have moved on to the second movement of mine, so to speak.
“Some folks in community banking have asked for my assistance in taking on credit unions, head-to-head, nose to nose. I have enthusiastically accepted. I have been scheduled for some webinars and convention sessions in the next few months.
It was my privilege to walk among giants; you, Bucky, Jim Blaine, and many others. Thank you. Sadly, Camelot is dead and the movement is no more. Members are a means to an end, that end being feeding the cash flows of executive compensation, vendors, consultants, CUNA/ NAFCU and the NCUA.”
A Member Reacts to the Merger of His Credit Union
A member wrote of his disappointment following the merger of the credit union he had joined as an employee of the sponsor. This comment from over a year ago, and the examples he describes, have only multiplied since.
“You likely already know if this is true or not. I wonder if national banks are aware of all the CU mergers and trying to lure disgruntled credit union member away from the new Continuing Credit Union that the member has no relationship with. I just got an email from M&T Bank about a $250 new account offer. The web must be tracking my bank/credit union shopping and my data is being sold like everything else we do online.
If all the mergers are similar to Xceed/Kinecta’s, then there are a lot of officers in small CUs that are getting big paydays. It looks like all these smaller CU executive teams must do is sell their members on the idea that a merger with a larger CU benefits each of them somehow. I’d imagine the smaller credit union leaders are seeing their peers who are part of mergers getting big raises, bonuses or severances for a comfy retirement and want the same.
Xceed’s President/CEO is eligible to received $1,500,000 possible maximum compensation for 3 years after the merger my notice states. She gets an immediate raise of $71,403. The if she is terminated for “good reason” within 3 years she is eligible for a prorated severance in a max potential of $1,500,000. The others (senior executives) all stand to gain between roughly $250,000-$600,000 under different but similar conditions.
Possibly the word is out among the CU community that Big credit unions are looking for Small prey credit unions and if you’re lucky enough to get caught, simply agree to be eaten and those at the top of the small credit union get rich at the expense of the membership.
You made me happy sharing my feelings if this helps others impacted by these mergers. Maybe if enough members leave after their credit unions merge, the remaining small credit union Presidents/CEOs will think twice and keep the community or employer-based CU in place.
Sorry Chip for running on with my “It’s a wonderful life” like email. I read back my email and laughed at myself. Anyway, have a great rest of the day. ”
Three separate examples. These people are saying “Without vision the people perish,” or more accurately, the cooperative system in America.
Get ready for Federal taxes. Congress will not tolerate this egregious continued abuse of members.
This is not the exception: IT IS THE RULE. It’s Co-op economic cannibalism. The BIG credit unions eat the SMALL. The NCUA does nothing. The small credit union with huge net worth/capital is merged with the Big credit union. The SMALL credit union CEO gets a huge tribute / bonus / for making the delivery. The SMALL credit union CEO delivers the net worth to the BIG credit union and gets a kick back from the merger. It is EXTORTION.
The SMALL credit union membership gets the goose egg. And we hear crickets from the credit union trade associations as they are addicted to the BIG credit unions paying the trade association dues. It is a complete shake down. It is all about GREED – When More Is Never Enough.