Movement versus Members

Credit Union Journal (paid subscription) reported that Space Coast CU does not expect to receive any assistance from the NCUSIF regarding its merger with failed Eastern Financial Florida CU.

While Space Coast’s action may benefit the credit union industry by limiting the hit to its share (deposit) insurance fund and premiums paid by other credit unions, is this decision in the best interest of the Space Coast’s members?

Space Coast stated that the merger would cause the credit union to plummet from being very well capitalized to adequately capitalized.

What is left unsaid is that this merger will dilute the residual claim of its members – if the credit union was to voluntarily liquidate.

Before the merger, for every $1,000 on deposit at Space Coast, a member had a claim of almost $133 on Space Coast CU. After the merger, the new combined membership claim on the net worth fell to almost $75 for every $1,000 on deposit.

This analysis is based upon first quarter data filed by Eastern and Space Coast with the National Credit Union Administration.

This begs the question – did the Board of Space Coast fulfill its fiduciary responsibility to its members by approving this merger without seeking some type of capital infusion from the NCUSIF?