Chartway Completes Utah P&A, Eyes Further Merger Opportunities
The $1.6 billion Chartway Federal Credit Union has consolidated a second NCUA-conserved Utah credit union, the $139 million SouthWest Community FCU of St. George, Utah.
After the purchase and assumption completed days before the July 4 holiday, the Virginia Beach CU said it might look for further acquisitions in the coming weeks, perhaps in the sand states or west of the Mississippi. Chartway has not been shy about its desire to expand nationwide through mergers.
The terms of the SouthWest transaction were not disclosed. The NCUA said it liquidated SouthWest after the credit union failed to improve its financial position over several quarters.
Last December Chartway merged the $311 million HeritageWest FCU of Tooele, Utah. HeritageWest now operates as a division of Chartway and so will SouthWest, Chartway President/CEO Ron Burniske said.
Chartway took over the southern Utah CU when its net worth ratio sat at 3.18%, delinquencies hit 6.33% at the end of the first quarter, and return on assets was negative over the last five quarters, reported as negative 2% at the end of March.
Burniske said the SouthWest merger fit well into Chartway's plans to grow its footprint in Utah, which he said has huge potential even though the state has experienced a sharp real estate slump. In a statement, Burniske said the "partnership with SouthWest will ease the ongoing market stress SouthWest has endured as a result of the economic downturn." He added, "As our nation's citizens have struggled to stay afloat, so have financial institutions, because what happens to those on Main Street in turn happens to their banks and credit unions."
The liquidation then purchase and assumption method "works well in eliminating liabilities and letting us start from a clean slate," explained Burniske. The acquisition was handled with careful due diligence to ensure a correct fit, he added, noting the talks with the SouthWest Board and management have been in the works for five months. SouthWest's deteriorating financial condition and desire for a merger was brought to Chartway's attention by managers at the HeritageWest division, Burniske said.
Chartway remains in healthy condition with a 7.11% capital ratio, according to Burniske, and expects to post net income of $2 million for the first six months.
Southwest Community, founded in 1937, served 19,000 members and was the 10th CU the NCUA has liquidated this year. Chartway has 191,000 members and 60 branches in 10 states.