Yesterday I posted a 3,000 word analysis of the proposed merger of Spirit Financial in Levittown, PA with Credit Union 1 headquartered in Lombard, IL.
Included in the analysis are the reactions of two Spirit members from NCUA’s website:
Member Brian Stuart comment: I am voting against the proposed merger of Spirit Financial Credit Union with Credit Union 1. Credit Union 1 is based in Lombard, Illinois. All of its branches are in Illinois. There is no advantage to the Spirit Credit Union member to merge with Credit Union 1. Merging with Credit Union 1 would take away the local Bucks County focus of Spirit Financial Credit Union, which should be its mission. . .
Member Joann Glasson: As a long-time member of Spirit Financial Credit Union, I am sad to see this merger occur when the CD rates are so much lower at Credit Union 1 and the loan rates are so much higher at Credit Union 1.
We are retirees with large deposits at Spirit that we will be forced to move if the merger is approved. This merger is not a service to the members of Spirit Financial Credit Union
Due to the article’s length, I sent the following summary to the press:
$9 MILLION IN LEVITTOWN COMMUNITY WEALTH TO BE GIVEN AWAY – CREDIT UNION CEO WOULD RECEIVE $4.4 MILLION
Spirit Financial Credit Union, a strong and profitable 72-year-old community institution, is being absorbed by Credit Union 1 of Illinois (pending a member vote) and in the process, Levittown’s families will lose nearly $9 million in community-built capital, while Spirit’s CEO personally will walk away with more than $4.4 million in payouts and benefits. Member balloting on this proposal ends Dec. 22.
Spirit Financial isn’t struggling — it is thriving:
- highly capitalized,
- financially stable,
- outperforming peers,
- and the only locally headquartered depository institution serving Levittown.
Yet in a quiet, opaque merger, every dollar of the members’ accumulated equity of approximately $9 million will be transferred to an out-of-state institution for free:
- No payouts to Spirit Financial member-owners
- No equity retention
- No bonus dividend
- No local control
- No sole ownership
Levittown’s families built this wealth, and now it’s about to go away.
Meanwhile, the Spirit CEO who championed the merger receives:
- A massive cash bonus at closing
- A guaranteed five-year employment contract
- Incentive packages to solicit more mergers
- A fully vested multimillion-dollar retirement package, all totaling more than $4.4 million in personal enrichment.
Community wealth will be removed, assimilated, and relocated, while ordinary member-owners will be left with nothing.
Control of Levittown’s financial legacy will shift to a board in Illinois that is unreachable, unelected, and governed by mechanisms that dramatically limit member democracy.
This is not an isolated incident. Credit Union 1 has initiated over 20 such mergers in just 3½ years, importing hundreds of millions in community assets and capital and using merger accounting to mask weak operating earnings while expanding its asset base by taking over independent, strong local credit unions.
This development raises urgent public questions:
- How can a member-owned institution be sold without any benefit to its owners?
- Should executives be allowed to personally profit from the liquidation of community capital?
- Where is regulatory oversight when cooperative ownership is silently dissolved?
- Which Pennsylvania credit union will be targeted next?
If this were a stock corporation or public company, shareholders would be compensated, and regulators would not tolerate uncompensated transfer of equity. But cooperative members will receive no payout, no recourse, and diminished legal standing.
A sad, even disgusting, commentary…. a seemingly total dis-avowal by a CEO, perhaps some others in management and by the Board, of their stewardship responsibilities to the member-owners for the protection of the member’s ownership and welfare.
I just don’t get it. Shame on Credit Union 1 for their aggressive buyouts of credit unions across the country that takes away local ownership, and in this case, appears to offer no benefits. And shame on small credit unions who make the decision to merge without considering the real impact on members. Did they consider other credit unions to see who would really be the best fit for their members? What factors went into this decision? I’ll say it again, when your primary strategy for growth is to take out small credit unions, that’s a real problem in our industry. And one that needs to be addressed.
Typical CEO greed. Selling his soul and the community to make a quick buck.
At what point will the NCUA use their oversight to prevent this, and what can be done to prevent the breach of fiduciary duty by executive management and boards?
Below is a fantastic public comment made on the merger from a former long-tenured employee and member. They are spot on:
I am a former employee and currently a long-term member of Spirit Financial Credit Union. I am extremely opposed to the proposed merger of Spirit with Credit Union 1. I have a unique perspective of this credit union considering I worked there for 10+ years and have been a member for over 20 years. I know that this credit union has done a remarkable job at staying true to its roots, having a strong community focus, and concentrating on keeping strong personal relationships. Spirit is a prime example of what a small credit should be in this fast-paced world we live in.
The notice that was issued to the members of Spirit is worrisome to me. It is vague and honestly lacks any transparency regarding why this merger is being proposed. There are many questions that have been raised after reading the notice. Why was the membership only provided with one quarter of financial information? Why is the current Chief Executive Officer obtaining a fully vested 3-million-dollar retirement plan and other substantial incentives at time of acquirement? Why is there so much incentive for this one employee who has been with the credit union for such a short time? Meanwhile, the other Spirit staff members are guaranteed a shorter employment period with Credit Union 1 and salary raises that will only put them in line with their peers. Many of these employees at Spirit have been there for 15+ years.
It concerns me that the membership and employees will be nothing more than a number and hold no true value to Credit Union 1 post-merger. Unfortunately, Spirit will lose its 72 years as a trusted financial institution to many and become more like a bank that only seeks to profit from its customers. Begrudgingly, I have already taken steps to move all my personal and business funds from Spirit to another local credit union.
It’s difficult but important to keep reading about CEOs driven by greed and Directors failing to serve their members in such dramatic ways. It happened in Vermont several years ago and there has not been any advantage for members, community or marketplace. While CEOs make lots more and Directors feel more important – Vermonters lost!