"Alex, I'll pick..."CU Member Equity"... for $2,000."
We've been talking about the escalating commercialization of credit unions on both the state and national level... and how credit union members stand an almost guaranteed chance of "getting fleeced"- if history is a reasonable guide.
Been using SECU for examples, but lets switch to a recently announced merger proposal in Massachusetts [link], for a real-life example and let you determine "What's best?"
The two CUs involved are Brightbridge CU [link] and AARHA CU [link]. Both look like fine CUs, run by fine folks, no apparent problems.
Brightbridge is located mostly in eastern Mass, has @$2.2 billion in assets, 19 branches and is very well-capitalized at @10% [to be "well-capitalized" by federal law, a CU must have capital/reserves > 7%]. AARHA - has been around since 1929! - serves mainly western Mass, has @$152 million in assets, 4 branches, and is also well-capitalized at @8.5%.
Brightbridge ia the acquiring credit union, which usually means - at least at first - nothing much will change for AARHA members except the sign on the door. Accounts, rates, loans, checking, etc all just switch over to Brightbridge data systems.
✳ Here's the catch! AARHA CU has only @6,000 members and since 1929 has accumulated over $12 million in capital/reserves - that member equity belongs to each and every AARHA member!
✅ The AARHA Board of Directors has two possible ways to complete this merger "on behalf of AARHA member-owners":
1) Just give AARHA CU to Brightbridge - including the $30 million in cash/investments, $100 million in high performing loans, all those branches and account relationships .... and $12 million in member equity.
or
2) Just give AARHA CU to Brightbridge - including the $30 million in cash/investments, $100 million in high performing loans, all those branches and account relationships .... and send each of the current 6,000 AARHA members a "member equity" check for $2,000 (total $12 million).
😎 Brightbridge gets a "free credit union" either way [and remains "well-capitalized"!], so you know how those folks will vote.
😎 How would you vote if you were an AARHA member? What if the AARHA Board didn't let you vote on those two choices?
“Credit union members stand an almost guaranteed chance of getting fleeced” is a dramatic and hyperbolic statement. Ridiculous.
ReplyDelete8:59am Would you feel it would be ridiculous for 6,000 AARH members to approve the merger and receive $2,000? Why?
DeleteNo, but what does that have to do with his comment? Do you really think SECU member's capital is going to be stolen and we're going to be fleeced?
Delete6:37pm Does anything prevent it from happening at SECU? Could we discuss this issue at the Annual Meeting?
DeleteSilly example, as always. In #1, you don't just "give" it to them, and the 12 million doesn't go away. The AARHA members would now have a claim on the combined equity of the new org. In #2, so would I even be a member of Brightbridge? If yes, you're saying I get my 2k, and as a member of the new CU, I get a claim on their 2.2 billion in equity? Wow! Neat deal! If only it worked that way. If not a member, then my loan and deposits are held by an org I'm not a member of can vote within? HOw does that help me?
ReplyDeleteAt least Jeordardy uses real questions. Your little made up examples are incorrect, impractical and are false choices.
Interesting that you use the term "false choice". Your whole premise is false. Perhaps you would benefit from an accounting refresher.
DeleteYour disdain for the facts and the "lowly" member is only outweighed by your own arrogance.
9:28am Afraid that the 3:13pm commenter is right, an accounting "refresher" is in order. With the merger the AARHA folks do automatically become members of Brightbridge... all the accounts, including share balances transfer to BBridge.
DeleteYes, as with any other new member you get a claim on the member equity at BBridge.
Why don't you want the AARHA members to get their $2,000 in member equity? It's their money.
If they merge, and the capital is pooled, it's still their money, is it not?
Delete5:35. Merge, they still have a claim on the capital, but instead of paying it out and lowering the combined capital ratio, invest it in more products and services and capabilities that the 6,000 members will benefit from, and ultimately their capital will be worth more than 2,000.
Delete6:43 pm So if you sold your house, you would let the buyer keep your built up equity? Why would a sensible person do that?
DeleteDid you purposefully "overlook" that the surviving CU remains well-capitalized? Why?
The invest "in new products" and all that is pure BS. You're not up to speed on how a credit union actually works.
BTW, let me know whrn you sell your house...
6:38pm if the members own it, can they withdraw it? Why not?
DeleteWhat does this have to do with our organization?
ReplyDeleteSee tomorrow's post.
DeleteSo how much are the boards and CEOs going to give themselves of that 12 Million $$$$ in "reserves"? It never goes to the members but the admin side seems to believe that it's ok for them to have some reserves. And the lawyers get some too for merging two sound credit unions. Nothing ridiculous about the example except the part where anyone would think that members might be getting some cash. No one understands that that reserve money is from the members. Even if that is understood, those dollars have no one's name on them so that is free money! Up for grabs.
ReplyDeleteI'll take "fleecing the flock" for $200 for each member ... (10% for the little guy) ... be happy we 'give' you that!
ReplyDelete4:36pm Spoken like a true merger mania predator!!!
DeleteBut actually, you're being too generous... not a good trait if you're going to be a capitalist mogul. Remember never give a credit union sucker an even break...especially when they think they can trust you!
If you get it for free why give 'em a $200 break... have you no shame?