Wednesday, June 2, 2010

Another Mega-Merger Announced

Kinecta Federal Credit Union and NuVision Federal Credit Union announced that the Boards of each organization have signed a letter of intent to merge the two credit unions. Earlier this year, I reported that First Tech CU and Addison Avenue FCU had announced their intent to merge creating a $5 billion credit union.

The proposed merger would create a $4.7 billion credit union with 40 branches primarily throughout Los Angeles and Orange Counties in California.

This announcement should not come as a total surprise. Kinecta FCU was in the middle of a CEO search and had been hard hit by the recession reporting losses of $44.3 million in 2008 and $71.3 million in 2009. As of March 2010, Kinecta reported $136.2 million in delinquent loans, which equaled 58.25 percent of the credit union's net worth.

We should expect more of these mega-merger announcements in the coming months, as financially crippled credit unions seek merger partners. As of the end of April, NCUA is reporting that there were 14 credit unions with $1 billion or more in assets that were rated a CAMEL 4 or 5 and 16 billion-dollar plus credit unions with a CAMEL rating of 3.


  1. Zzzz… Not mega-mergers, but rather mini-mergers in comparison to the lewd combinations that made BAC and/or JPM into $2 trillion + institutions. Put another way, if after merging they became a $4.7 billion depository, and if they miraculously grew at another $4.7 billion a month, it would take nearly 40 years for the Kenecta/Nuvision CU merger to equal today’s size of those still-faltering big mega-merged banks. Accordingly, this is small stuff.

    No arguing, some credit unions suffered collateral damage due to banking’s crisis. As a result there are a few large (and small) credit unions with poor CAMEL ratings. But unlike banks, credit unions’ joint and several liability has them generally merging without public assistance and paying for any damage from BANK crisis economic downturn costs themselves.

    Again, compare to the US taxpayer cost of shot-gun weddings and system rescue for TBTF banks that really defines the term mega-mergers. It now equals more than 73% of all US GDP, including $3.7 trillion in liquidity insurance, $0.7 trillion in capital injections, expensive new deposit insurance safety-nets for MMF and uninsured deposits, $3.7 trillion in general economic stimulus and money creation, $0.2 trillion swapping bad bank collateral for good, $0.03 trillion to goose small business lending again, $2.8 trillion in bank asset guarantees, rear-facing tax give-backs to offset malfeasance caused income losses, and more.

    The meter measuring the cost at which the bank mega-merged system is bleeding the US economy as banks socialize their losses now reads $10.5 trillion. Credit unions pay for their own losses, but how will banks ever pay that enormous sum back? Do they intend to? Will they even acknowledge the mega-problem, the public’s mega-disgust, or their own mega-responsibility?

  2. This merger is large by credit union industry standards.



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