The Wall Street Journal is reporting on the aggressive growth strategy of Pentagon Federal Credit Union (McLean, VA) to serve everyone.
James Schenck, chief executive of the credit union, mantra is "No Speed Limit." Pentagon Federal Credit Union (PenFed) has the goal of quadrupling it assets to $75 billion by 2025.
To help fuel its growth, "PenFed has acquired 13 smaller credit unions in a 20-month span between 2015 and 2017, before receiving a regulatory warning about new deals."
The article also points out that anyone can join PenFed by making a one time donation to two troop-supporting organizations. According to the credit union, less than one in five members joined this way.
This would suggests that approximately 300,000 members have been added via these two associations.
However, Robert Taylor, chief executive of Idaho State University Federal Credit Union (Pocatello, ID), worries that credit unions that engage in “expansionism for the sake of expansionism” risk the industry’s reputation.
It could also risk the industry's tax exemption.
Read the story (subscription may be required).
When you join and pay the donation you pay that directly to the CU. Who's verifying that they actually send on the donation? I can tell you that NCUA doesn't verify this.
ReplyDeleteSounds like a great opportunity to pad non-interest income
Economic cannibalism. We are eating our young. Soon there will be no more prey for Pentagon to gobble up. What will be there next hat trick for asset growth? How much cash compensation is being paid out to the merged out credit union CEO and directors to induce the acquisition? How much net worth is being raped, pillaged, plundered, exhausted, depleted, and extinguished from the merged out credit union to grease the pigs at the trough? The members net worth is being squandered. NCUA approved. Members screwed.
ReplyDeleteNCUA should be congratulated for doing the right thing, approving the mergers.
DeleteThere are thousands of credit unions spending millions of “member” capital by sending board members to exotic (or simply expensive) boondoggles while their members get mediocre and below market value versus larger credit unions and banks.
If you want to soap box on protecting members, work on THAT monumental theft of capital.
To get to $75 billion by 2025, this credit union would need annualized growth of 20% per year, which also means it will need a lot of capital to get there. Assuming the growth is all organic, it would need an ROA of about 2.00% per year to support 20% growth. That's a lot of profit (and risk) each year. Much more than most banks make (take). I guess I don't understand which of the cooperative principles states that you should take that much profit from your participants. Is the board representing the CEO, or is it representing its members?
ReplyDeleteIs the board whose credit union sends them to expensive conferences to “learn” how to be “better”, only to continue to not provide the technology, convenience and rates that the large credit unions provide...looking out for their members?
DeleteNope.