Credit Unions: The Godfather Mergers - Part XII

  .... or do they?

The SAFE CU Board of Directors has voted to merge with BECU, in effect giving away the Sacramento-based, member-owned credit union worth between $400 to $800 million [link] [link] .

✅ The California credit union regulator (DFPI) must approve the merger on behalf of 244,000 SAFE members, who primarily live in the State. Here's how the state regulator views its responsibility to SAFE members and the State of California:
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"We believe that the combination of access, low fees, favorable state laws, and expertise and experience of the Department’s staff, make the state charter the charter of choice for California financial institutions 

Consumer protection is the foundation of DFPI’s mission, vision and purpose. In addition to regulation and rule enforcement, DFPI helps Californians by providing the tools and information to help them improve their financial outlook. This includes,..

• A dedicated Consumers page, including resources to help people better understand their rights and make well-informed financial decisions, submit a complaint, verify licensed service providers, search enforcement records, and more. [link to more] "  

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 ✔ If the California DFPI endorses the merger, California will lose 1) a local, home-grown financial institution - owned by Californians, 2) export control of $400+ million in locally-owned capital - and the locally-focused economic development that capital supports - out  of state, 3) cede control of over $4+ billion in California consumer deposits to Washington State, and 4) essentially acknowledge that California DFPI does not, as it claims, offer "the state charter of choice for California credit unions". 

😎 Is encouraging and supporting the future expropriation of member-owned, credit union reserves for all California credit unions the definition of "consumer protection," - really?

 

  Do California Governor Newsome and his economic development folks agree with this downsizing of Sacramento?     

Credit Unions: The Godfather Mergers - Part XI

 

“This is the business [the credit union] we’ve chosen.”  - V. Corleone

Hope you took a look yesterday at the following post [link] - explaining the current unseemliness of credit union mergers - for a couple of reasons: 

1) CU merger malpractice is widespread and has become predatory, 

2) the lack of effective regulatory oversight needs legislation,

3) or the clear breach of fiduciary duty by credit union boards and senior management requires litigation, 

4) And, as with our society... with credit unions , when anything goes everything goes. 

😎 A "Hobson's Choice"?:  Credit unions through mergers 1) are being mismanaged and misled or 2) are being sacked and looted? 

✅ In our example merger between BECU/SAFE, it is indisputable that 1) SAFE CU is worth over $400+ million, 2) SAFE members can obtain the benefits of BECU membership for free by simply joining BECU (open membership), 3) the SAFE Board could easily and legally disburse over $400+ million to SAFE members and the merger would still be an exceptional purchase for BECU, 4) the merger proposal approved by the SAFE Board fails every test of economic, open market, business reasonableness, and 5) the current SAFE Board recommendation to the membership is financially deplorable - no if's, and's, or but's!

✅ A couple of commenters have rightfully asked: "Was the potential sale of SAFE CU publicized, so that other credit unions could review and bid on the acquisition?" If not, why not? How did the SAFE Board of Directors decide that BECU represented the best offer? 

If you were selling your home, would you list it publicly to seek the best price? Or as with this "sale", just give it away? Not seeking multiple bidders, nor the best price for SAFE shareholders fails the standards of "best practices", due diligence and fiduciary duty in the real world. 

Some commenters make the mistake of believing only a "larger" credit union could purchase the $4 billion SAFE - absolutely not true.  Even a $100 million CU could offer to merge with SAFE creating a $4.1 billion new CU. 

What the smaller, acquiring credit union might bring is a new energetic board with new ideas and a new vision on how to continue the growth of "the fastest growing CU in Sacramento" (according to BECU). 

✔ A different, more inspirational acquirer - small or large - could replace the existing board which is ready to throw in the towel, ready to sell out. Who wants to to work for a group which has given up? 

✔ And, perhaps the new acquirer could bring forth some "new creative blood" to replace the senior management who has already volunteered to step down; and evidently, sees no benefit, no way forward as a local, independent California-focused institution. Why has the senior leadership given up on the existing staff and culture? What - or who - is actually the problem here requiring merger? 

California alone has 234 other local credit unions which might be interested in taking over SAFE and leading it forward. Some are larger, some are smaller. There are even two or three existing, Sacramento-based credit unions which have better operating expense and capital ratios than BECU! 

So, want to lower costs and truly enhance local service for SAFE member-owners ... think about the economies of scale and real service benefits of combining with other local, California credit unions! Why not seek answers locally, rather than take orders from Tukwila? 

😎 Probably not too difficult to find a few exciting, young CU leaders who would be willing to step up to this challenge, this wonderful opportunity...  in exchange for that $1+ million CEO pay package!  If you think no one is interested, try asking around... 

✔ All California credit unions could offer a better financial deal to SAFE members than the merger currently approved by the SAFE Board 

  Don't believe that last statement, wanna bet?