NCUA policy on selection of merger partners for both voluntary and involuntary mergers is coming under harsh new scrutiny this month. The now-completed Utah consolidation is the focal point of both concern and controversy marked by complaints that a group of spurned Utah credit unions--some were potential bidders--were effectively eliminated.
Meanwhile, the successful bidder in June for the NCUA-conserved $139 million SouthWest Community FCU of St. George accused unnamed Utah CUs of being "cry babies" in complaining to the agency over what was described as favoritism to big East Coast CUs and overlooking key data in shutting out local suitors.
"It's time these guys grow up and comprehend this is the real world of business since no one hands you opportunities-you have to seek them out," said Ronald Burniske, president/CEO of the $1.6 billion Chartway FCU of Virginia Beach, which on June 30 won NCUA approval to merge SouthWest into Chartway's 60-branch, 10-state network following a liquidation procedure.
That was Chartway's second Utah expansion in six months after successfully merging with NCUA approval the failed $311 million HeritageWest FCU of Tooele, Utah. HeritageWest and SouthWest are now divisions of Chartway, which has effectively expanded its Utah footprint to 50% of the state encompassing metro Salt Lake City as well as a large portion of southern Utah.
Burniske said his staff had done months of advance leg work talking to NCUA regional directors and others about potential Utah mergers before the NCUA gave Chartway the green light on both mergers.
Scott Simpson, president/CEO of the Utah League of Credit Unions, conceded Utah CUs have been frustrated over NCUA merger policy for some time and a June letter outlining an updated procedure did not entirely clear up confusion.
"There appears to be a twilight or gray area between when a voluntary merger becomes an involuntary one" said Simpson in citing timing and notification conflicts when potential suitors are formally notified. There still seems a loss of clarity on the timing issue, he added.
"Our letter comprehensively addresses these issues. Safety and soundness, no cost to SIF and continued member service are paramount concerns," said NCUA spokesman John McKechnie.
Another gripe of the Utah CEOs centers on Chartway's post-merger accounting practices with questions raised about the Virginia CU's increased capital ratios following the merger of the two failed CUs both of which suffered sharp loan losses. Also at issue is the amount of NCUA assistance provided to suitors with a contention by the Utahans that East Coast CUs are favored.
Phil Patten, president/CEO of the $70 million American United Family of CUS, Salt Lake City, said his CU in completing mergers of small Utah and California CUs has worked at perfecting a business model that has demonstrated high growth potential and less expense.
However, he said, the NCUA apparently has opted for the "multi-state hybrid" to the detriment of small CUs and causing harm to the entire industry, said Patten, whose CU sports a 10.91% capital ratio, though like a number of Utah CUs suffered losses in 2009. It ended the year $1 million in the red.
"Is it a surprise that a credit union close to Alexandria gets the favored treatment over the locals?" said one CEO who asked not to be identified.
Nathan Anderson, executive vice president and chief operating officer of the $2.7 billion Mountain America FCU of West Jordan, also questioned NCUA merger assistance, particularly on disclosure.
"Any time there is assistance given to facilitate a merger we would like to see full disclosure and to have multiple bidders," said Anderson.
Like other CU leaders, Anderson said Chartway's Utah fast track continues to raise eyebrows.
"It is interesting that a credit union, Chartway, that did not exist in this state until last year now has the largest FOM in Utah," Anderson said.