Johnson said TDECU is focused on additional credit union merger opportunities within its market that will bring value to members of both organizations.

The initial strategic rationale for TDECU’s acquisition of Sabine Bank was to diversify the credit union’s loan commercial loan portfolio and expand into the Louisiana market. Had this second largest deal been consummated, it would have marked the first credit union whole bank acquisition in the Bayou State.

Johnson noted credit union-bank acquisitions have come under more scrutiny from regulators.

In December, following discussions with Georgia regulators, the $2.4 billion Atlanta Postal Credit Union called off its proposed deal to purchase the $911 million Affinity Bank in Covington. That purchase agreement was announced in May.

What’s more, the Independent Community Bankers of America (ICBA) has intensified its opposition to these transactions. The organization has argued that tax-exempt credit unions acquiring tax-paying community banks is a dangerous trend. To derail it, the ICBA has urged Congress to hold hearings and consider an exit fee on credit union purchases of tax-paying banks to recapture lost tax revenue. In March, ICBA also proposed a new policy urging lawmakers to eliminate the federal tax exemption for credit unions with more than $1 billion in assets or to establish tax parity with community banks.

In a separate and unrelated transaction, Space City members in May approved consolidating with TDECU, which will expand the credit union’s market reach in East Houston and its membership by more than 12,000, bringing the total to nearly 400,000. TDECU is the fourth largest financial cooperative in the Lone Star State.

When TDECU initially announced the merger last September, the credit union planned to rename itself Space City Financial Credit Union.

However, because TDECU continues to have conversations with other credit unions in its marketplace about “partnering or merging,” Johnson said it was decided to delay the rebrand. For now, the Houston-based Space City continues to operate as a division of TDECU.

“As management, we wanted to remain agile as we continue to have conversations with other credit unions going forward. The Space City brand is a strong brand and I want to be very clear that we’re not walking away from that brand,” Johnson explained. “We will continue to have elements of that brand going forward. We slowed down our rebrand journey so that we can align with a growth strategy and future opportunities. The new brand will reflect who we are and where we’re going.”

Aside from the rebranding, some Space City members opposed the merger after reading compensation details disclosed in merger documents filed with the NCUA.

For example, Space City’s board of directors approved a lump sum of $3.5 million to former Space City President/CEO Craig Rohden. This represented the estimated amount of compensation he would have received had he remained with the credit union until retirement. TDECU also agreed to pay Rohden an additional lump sum of $500,000 as part of a two-year noncompete and nonsolicitation agreement.

The board said these payments were warranted due to Rohden’s 30-year tenure, during which the credit union grew from $3.8 million to $134 million in assets. Loans increased from $2.8 million to nearly $93 million, and membership expanded from 2,720 to more than 12,000.

In addition, the board approved a payment of $1.9 million to COO Nikki Moore-Owen, with TDECU paying her an additional $350,000 for a two-year noncompete, nonsolicitation and retention agreement. Moore-Owen will continue with TDECU as an SVP. Paula Newkirk, former vice president of lending and member solutions, received a board-approved payment of $500,000 and will remain with TDECU as vice president.

The board said Moore-Owen and Newkirk’s compensation packages were justified based on their tenure and performance in advancing the credit union’s growth.

However, some Space City members strongly disagreed with the executive payouts.

“Credit unions are nonprofit organizations established for the mutual benefit of their members,” John and Ramona Van Leeuwen wrote in their comment letter. “It’s counterintuitive to believe that executives would profit from a merger, especially considering the CEO received a salary, bonus structure (percentage of ROA), benefits, retirement and flexible/hybrid work allowances. Their service has been fairly compensated.”

In another comment letter, Hester Wende wrote, “Looking at the merger documents, it appears that this merger is all about the current president and vice presidents receiving a very significant buyout at the expense of members' earnings.”

Peter Strozniak can be reached at [email protected].