The problematic trend in credit union mergers are well documented:
- Consolidation of healthy, independent coops undermines the sysem’s financial diversity and its safety and soundness
- Member-owners’ voices are left out-the unique democratic coop governance process is compromised
- Consumer choice and value are reduced
- Credit union competitive advantages for market penetration are destroyed as local leadership and control of member savings is ended
- Self-dealing and institutional enrichment stain the coop system
- The use of banking industry market tactics to expand into multi-state or national charters destroys the unique cooperative purpose and design, This could result in the loss ofthe industry’s federal tax exemption
Mergers have placed the structure and character of the cooperative system at an inflection point. To understand the extent of the continuing appropriations of members’ capital and the closures of their independent charter, is best illustrated with a simple example. One that has been replicated by a single credit union merger-predator over 20 times.
The Case Study
Spirit Financial Credit Union (Spirit) is a $70 million, single office coop located in Levittown, PA (pop. est. 50,000) in the Philadelphia metropolitan area. It is known as the first large-scale, mass-produced suburb of post-WW II America,
Chartered in 1953 as Fairless Employees Credit Union, its primary membership was serving employees of the United States Steel Corporation. The charter changed to a community FOM for Bucks County in 2005. The name was changed to Spirit Financial in 2016 to reflect “our vision of helping this diverse community to achieve personal financial growth throughout all stages of life.”
Its mission: “we want to be your trusted financial partner to help you achieve your financial goals. . . We are dedicated to building lifelong relationships with our members and to making a difference in the lives of the people we serve.” (from website)
While two credit unions and several banks have branches in Levittown, Spirit is the only locally owned and controlled depository institution headquartered there.
Rock Solid Financials
At September 30, 2025, Spirit’s call report reported the following: $30.8 million loans (75% real estate secured), $59.7 million shares, $0 borrowings, and over $9 million in equity for a 13.2 % net worth/capital ratio. For the first nine months, the net income was $365K for an ROA of .70%.
This bottom line is due in part to an operating expense to average asset ratio of just 2.72% or one whole percentage point lower than its peers. There are nine full-time employees earning an average annualized salary of $78K each. With delinquency of only .39%, this credit union has rock solid financials. Its history and track record make it an invaluable resource for the community’s future.
A Full-Service Product and Delivery Profile for Members
This coop is a five-star example of what a credit union can be. Services include all transaction accounts, certificate rates around 3.75%, home and auto insurance, and safety deposit boxes. The credit union provides all online transaction and statement options, mobile text messaging and alerts, free FICO scores and a chat bot. The lending options include all personal loans, auto and RV financing and a complete mortgage line including HELOC and smart equity refinancing. These product and services are available in person or in virtual channels via home banking.
The Merger Proposal
On October 14, 2025, the 3,800 members were sent a Notice of Special Meeting to vote on merging this 72- year-old, single location credit union with the $2.0 billion Credit Union 1 (CU 1) headquartered in Lombard, IL, some 800 miles and over 15 driving hours away.
Given this credit union’s three generations of home-grown loyalty, its status as the only locally owned and operated financial institution, its full-service offerings and solid financial performance under local leadership, there is just one question: WHY should member-owners transfer all their funds and future to unknown leaders with no connection or even knowledge of this community? Why should strangers be given the keys to this credit union’s opeations in Levittown?
The Member Notice Explanation
The official member meeting Notice discloses no specific loan, share or fee improvements from the merger that members do not already have. All nine listed “reasons for merger” are so general as to be meaningless, eg. “continued investment in the latest technology.” The nine reasons are identical, word for word, to three other mergers CU 1 is currently undertaking in a 30-day period around Spirit’s member vote.
In fact, Spirit’s Notice omits one section that is in these other merger explanations titled “Changes to services and Member Benefits.” This omission suggests there are none to be gained.
There is zero evidence that Spirit’s Board and CEO conducted any due diligence of CU 1’s track record. Or its leadership considered other credit union alternatives in the immediate area—if it truly believed a merger should be an option. These would be minimal requirements to fulfill their fiduciary duties of care and loyalty to the member owners of Spirit.
The key question is what is motivating this takeover? There is one detailed explanation required by NCUA’s merger rule. These are in the Merger Related Financial arrangements which provides an answer.
David Obarowski joined the credit union as CEO April 2017. Prior to this he was EVP/Chief Operating Officer of TruMark Financial Credit Union, a $3.4 billion coop with 24 Pennsylvania branches and head office is in Fort Washington.
In just over eight years as CEO, this merger “sale” will provide him with the following financial benefits listed in the Notice :
- A $200,000 bonus upon “merger closing.”
- Continued employment with the CU 1 for a period of five years with annual salary increased by $52,381 Spirit’s 2024 IRS 990 filing shows the CEO’s taxable income as $258,414 (salary portion is $207,617). With this increase added to his existing compensaton, this five-year payment will total between $1.250 million and $1.5 million.
- Additionally, to support CU 1’s “strategic growth and partnership goals” he will receive an incentive ranging from $1 to $50,000 for each credit union merger partner he successfully attracts into the continuing credit union.
- The CEO’s previously established SERP will become fully vested at $3.0 million, structured as $150,000 per year for 20 years starting at age 65. The SERP was entirely funded by Spirit. Reviewing the call report for the June and September 2025 Employee insurance, the funding increase appears tp jave talem place in the 2025 third quarter. It shows a $2.139 million increase in this account, more thand doubling the June ending alance of $2.096 million. This suggests a last-minute funding effort as the merger was being planned. Moreover, the Serp contains “a change of control clause” which means the $3.0 million is fully vested on merging. This change is an event largely initiated and directed by the CEO.
The total immediate financial benefit to CEO Obarowski is a minimum of $4.450 million plus additional bonus incentives. In only eight years as CEO in thia 72-year credit union, he has garnered a very golden parachute.
The termination of Spirit’s charter will give him between two and three times the total salary he earned as an 8-year CEO. It is equal to almost half of the Spirit’s total net worth.
Five other Spirit employees will receive annual salary increases as high as $18,172 and retention bonuses of $6,177. The salaries are to “align with that of similarly situated employees of the continuing credit union.” The CEO and five of the other nine employees receive immediate bonuses and salary raises.
The members whose loyalty and resources built the credit union receive nothing from their 72 years of common ownership and support.
The 3,794 owners’ entire savings, loans, investments and over $9.0 million of net worth is transferred to the complete control of CU 1. This is an institution about which they have been given no specific information about its business model, track record from other mergers or any descriptions of its leadership.
What Should Spirit’s Member-Owners Know About Credit Union 1
First, Spirit members should understand that as an Illinois state charter, post-merger, the CU 1 board controls all the decisions made by the credit union.
All other charters, state or federal, ensure members can vote for in nnual director elections and most critically on the issue of merging. Under an Illinois charter, members will be requested to give their voting power via proxy to the board. This is for all corporate decisions.
The result is that the board which controls all proxies, is self-perpetuating and not subject to the democratic process of one member one vote as in all other charters.
In Spirit’s case, members have no information that would enable them to make an informed decision about their future with CU 1. By law and regulation mergers that close a chater are so critical that all members, each with one vote, must decide the issue. But they have been left in the dark about what is really happening and especially CU 1’s business practices.
The official Notice provides only general phrases under the Reasons section of CU 1’s business priorities. Spirit members are given just two items of specific data. There is a geographic listing of all CU 1’s branch locations and a June 30, 2025 summary balance sheet and income statements with three performance ratios. There are no concrete facts to suggest these offer any benefit to the owners of Spirit.
Both sets of fact raise questions why Spirit would want to be a part of this ever-expanding coop conglomerate. CU 1 lists 41 branches operating in ten states. In six states there is just one branch. Spirit is the only location for PA, a presumption as members have yet to vote.
The relevant question is, do any of these other 40 locations in scattered throughout Illinois, Minnesota, North Dakota or Las Vegas provide any location benefit for Spirit’s members? Moreover, this widely dispersed branch network suggests operational priorities and services will be standardized, not tailored to specific communities’ needs.
Just as the salaries of the Spirit employees will be conformed post merer, it is likely that all operational procedures take precedence over local competitive circumstance or legacy services. For example, Spirit’s safe deposit boxes are a less common service for most financial institutions. Will Spirit members lose theirs?
The Uncertain Financial Performance of Credit Union 1
The primary conclusion one draws from the June 30 financial numbers in the Notice is that Spirit is in a significantly stronger position at $70 million than the $1.9 billion acquirer. Spirit’s net worth is 30% higher at 12.5% versus 9.56% at CU 1. The delinquency is one-fourth of that of CU 1 at .30% versus 1.24%. And Spirit spends less of its revenue on operating expenses at 61% versus 68.5% for CU 1. On fundamental measures of financial strength in the Notice, Spirit is markedly superior.
But a snapshot at one point in time does not begin to show the questionable financial strategy of CU 1. On October 2024 I published an analysis What to Do When Credit Unions Go Rogue? examining its business model and financial performance. Here are excerpts from one year ago:
“The core of Credit Union 1’s growth efforts are mergers. The operational intensity of acquiring and converting 11 credit unions (six outside Illinois) and all associated member and vendor relationships in just over two years would be a major operational challenge for any organization. The immediate question is how will the members of the merged credit unions benefit?
Additional details frpm that article: The $12 million Synergy Partners CU, Chicago announced on October 17 a members’ vote to merge with Credit Union 1. That would increase to 11 total mergers in only two and one-half years. These will transfer over $650 million in total assets and over 62,000 members’ financial futures to Credit Union 1’s control.”
Since that October 2024 analysis, CU 1 has announced another ten member votes of which over half are now approved and consolidation underway.
To succeed in this ever expanding acquistion campaign, the process is standardized with almost identically worded Member Notices. In these diverse combinaations, CEO’s are given big bonuses, extended “employment” contacts (ten years in one case) while the members receive nothing. Spirit’s case just replicates these previous acquisitions.
A House of Cards
My prior analysis suggested that CU 1 is a financial house of cards. For without these external financial boosts, it would have a declining balance sheet. It shows no organic growth from existing assets. Its operating net income depends on merger gains in multiple ways: gains from the sale of buildings, loans and other assets acquired, equity added in mergers, and negative goodwill, that is the “excess of net worth” when assets are revalued at the combination.
In its September 2025 call report, CU 1 posted net income of $4.6 million for an ROA of .only 29%. However as reported in the report’s detail, $4.4 million of income was from gains on sale of loans and gain from bargain purchase in mergers. More critically, net worth has been increased by $48.3 million from equity acquired in mergers. That is the capital reserves from other credit unions’ owners who received zero to transffeer of their common wealth to CU 1.
In the first nine months of 2025, CU 1’s net worth has had no increase from operating income. Retained earnings have fallen by $8 million even when including non-operating income gains. It is only the acquisition of $48.3 million pf other members’ collective equity that CU 1 has been able to maintain its net worth at 9.6% after adding $421 million more in merged assets.
In simple language other credit unions’ member owners are payng CU 1 to take over their opersions for free and whose assets are essentail to maintain CU 1’s own financial standing.
This is a cooperative Ponzi scheme. It takes the collective capital from the member-owners of merged credit unions and pays them nothing. CU 1 is unable to achieve an operating net income from the assets it manages. Without the extraordinary gains from these “free” wealth transfers CU 1 would be showing operating losses.
The increase in its balance sheet is just consolidation not market growth. A consolidation fueled by incenting other credit union CEO’s and boards to hand over their entire operations and net worth in exchange for personal benefit payments as described in Spirit’s case.
The Cooperative Graft Game
These mergers are a graft of member assets initiated by those in positions of power and responsibility. It takes two parties to do these deals, one to intiate and the other to accept the personal benefits for giving up their stewardship of their member-owner s’ financial asssets.
CU 1 has initiated over 20 of these acquisitions. The graft isn’t just of credit union members’ financial wealth but of each credit union’s long standng role and contribution in serving their communities..
In Levittown, the community loses its only locally owned financial institution, control over the use of its residents’ savings and future lending priorities as well asd local leadership. The post-merger pattern in CU 1’s consolidations is to slowly liquidate buildings and land for gain, close branches, lay off employees and convert as many members as possible to virtual status. The benefits of local presence and relationships are terminated.
All these takeovers are cloaked by a PR patina of CU 1 promotional endorsements, stadium and venue naming rights, sports team affiliations and market publicity in areas sometimes with no connection to its branch locations. For example the recent increase in Mountain West Basketball promotional support are for a conference in states in which the credit union has one branch so far.
Prevously employed CEO’s who received extended employment contracts, but are no longer in a CEO role, are encouraged or incented to entice other credit union CEO’s to follow their example..
The Spirit board and CEO have transferred their member-owners to a “cooperative cleaners” operation. The board did not even bother to compose their own Member Notice and just copied what CU 1 provided them with zero documented due diligence.
Similar Graft Induced Mergers Underway
There are three other CU 1 initiated member votes at the same period as Spirit’s. They are GU FCU in Rome, GA on December 11, at USE FCU, Chicago, IL, on December 2, and at First Area Credit Union, Saginaw, MI, on January 14, 2026.
This multi-state hustle campaign destroys these independent credit unions operations. They end their legacy relationships of service and local leadership. It ultimately undermines the cooperative system’s unique competitive foundation of local knowledge. leadership and long-term loyalty.
These repeated takeovers demonstrate that democratic member control is meaningless. CEOs can undertake whatever their ambition takes them with non-functioning board oversight. The regulators aren’t just asleep at the switch; they are enablers routinely approving Member Notices devoid of meaningful information, or filled with misinformation. Members see through these pro forma explanations that violate common sense. (See two comments posted below by Spirit members).
Mergers Undermine Credit Union Uniqueness
Mergers are not a market growth strategy for an organization or the coop system. No new members are gained, no loans are added and local footholds often closed. The idea that these acquisitions are new growth is a false concept peddled by consultants and other enablers. It is merely consolidation, an effort to dominate rather than serve. Coop merger math is simple: 1 + 1 = 1.
These transfers of cooperative wealth enrich only the enablers. They would not happen if credit unions operated in a free and transparent market. In a real market, there would be competitive offers for these valuable franchises. But these are back office deals, negotiated and sealed witn legal.greements in private. The required details are blessed by passive regulators before being sprung upon the members at the least minute. Their approval by voting is completed in less than 60 days with litle opportunity to challenge the egulatory approved summary information mailed.
The absence of transparency and dialogue with members undermines any possible discussion of alternatives or of the deal itself. Spirit’s website makes no mention of the merger proposal or vote. The local press is apparently unaware and uninformed.
By keeping these deals away from public visibility, the perpetrators count on member just checking the Yes box on the mailed ballot. This is the is the method by which almost all members vote. The only information is in the Notice along with the Board’s recommendation to approve the action. In peson attendance at the Special Meeting becomes a mere formality, not a democratic meeting forum.
Saving the Common Good
These coop merger transactions are private takings of common wealth.
Until the public and the members are informed of the perverse and sometimes corrupt practices fueling these acquisitions, the greed of a few will continue to stain and compromise the system’s future.
At some point members will rise up as they learn more about these enormous “free” wealth transfers. These efforts are now in the hundreds of millions and even billions of member owned institutions. At some point member-owners’ ire wll casue them to seek redress from the perpetrators through either political or legal actions.
And if local media and/or national business publications) begin examining these multi-million dollar self-dealing payouts and the billions of asset transfers without owner compensation, it may cause the latent democratic member spirit arise to stop these cooperative graft schemes. The democratic check and balance with, each member with one vote, is the supposed difference in cooperative versus for profit design.
Can credit union democracy save itself?
Two Spirit Member Posted Comments 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.
If Spirit Financial Credit Union would want to merge with another local Bucks County credit union, I would be in favor of that merger.
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
