Thursday, April 16, 2015

Mergers and Net Worth Adjustments

Recently, Pepsico Employees Federal Credit Union (White Plains, NY) was merged into larger USAlliance Federal Credit Union (Rye, NY).

The rationale for the merger was expanded services.

However, what was not disclosed was whether the 3,567 members of Pepsico Employees FCU received any net worth adjustment.

According to the December 2014 call reports, Pepsico Employees FCU had a higher net worth ratio than USAlliance FCU -- 13.95 percent versus 8.57. This is a difference of 538 basis points.

If the combined institution's net worth ratio was maintained at 8.57 percent, then the members of Pepsico Employees FCU should have received approximately $1.92 million net worth payment or slightly more than $65 per $1000 deposited at the credit union.

An e-mail to USAlliance FCU about whether a net worth adjustment was part of the merger agreement was not answered.

I don't know how prevalent such net worth adjustments are when credit unions merge; but if a credit union that merges into another has a higher net worth ratio, then its members should benefit by getting back a portion of the credit union's net worth.


  1. Doc,

    A-h-h at last! You are acknowledging that members do in fact have a true, measurable, individual equity interest in their credit union! Knew you would come around once you moved to N.C. Glad we now all agree why they call it a "member share", not a deposit.

    You're much better when you're mellow!

  2. Then again, the merged credit union members received benefits paid for by the surviving credit union. And the surviving credit union could also take that "extra" capital and provide additional services/convenience to the merged CU members. There are other ways to return that capital to the members of the merged credit union.



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