Month: July 2025

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Are America and its Credit Unions at a Tipping Point?

Much public discussion today debates whether the disruption led by the Trump administration is a turning point in history or just part of a cycle.

Many established institutions are confronting new financial and political realities.  Large legal firms, major universities, public and private media have  seen long held assumptions about their operations and purpose open to political and monetary challenge.

Credit unions are having “modest” internal debates about the propriety of mergers with million dollar payoffs to the initiators, increasing acquisitions of tax paying banks, and whether there should be any limits at all on financial services.  I say “modest” because most effort has focused on saving the tax exempt status even as future issues remain unaddressed.

A CEO at the World Credit Union Council meeting asks if it’s  time to question where credit unions are going (as reported by Frank Diekmann):

‘I’m here, in part, to make an appeal to all of us as cooperatives and as credit unions that it’s time for us to stand up again. For many of you, your credit union was rooted in a time where your community needed change, it needed support and it needed help. That might even be very recently.

But for many of our credit unions that have become more mature, we have perhaps become a little bit complacent about how we’re seeing ourselves play a role in supporting our communities. Once again, they’re needing us and the call to action is here,’ Wellington Holbrook, CEO of Vancity Credit Union World Council of Credit Unions

An Opportunity to Hear from Leadership

Tomorrow the Texas Credit Union Commission will hold one of its required public meetings beginning at 9:00 a.m. at the Department’s office. (see login information at end)

The Commission is the policy making body for Credit Union Department-CUD. The Commission is a board of five public members and four credit union executives appointed by and responsible to the Governor of Texas.

The mission  of this politically appointed group is to safeguard the public interest, protect the interests of credit union members and promote public confidence in credit unions.

Its members incude both credit union professionals and private citizens: Jim Minge, Chair; Becky L. Ames; Elizabeth L. “Liz” Bayless; David Bleazard; Karyn C. Brownlee; Beckie Stockstill; Cobb Cody; R. Huggins; David F. Shurtz and Kay Rankin-Swan.

Tomorrow’s meeting will be one of the few public opportunities for credit unions to hear how their appointed policy leaders assess current trends and events under their purview.

They have an important role not just in Texas, but nationally. NCUA’s solo board leadership considers public meetings as “only when needed” preferring to keep the industry updated on his views via social media posts.

Texas not only has a thriving and large state chartered credit union system.  It also has prime examples of two unsettling credit union trends: buying banks and self-serving mergers.

The Commission has a front row seat to both these events. How does the recent Space City-TDECU merger conform to their mission to protect the interests of credit union members?

This was an event marked by egregious self-dealing ($6.750 million bonus to CEO and two senior staff), conflicts of interests, $850,000 in payments by TDECU to the two principals of Space City and misleading information including use of its brand name.  (link)

At the very time this merger was completed, TDECU was on a downward financial spiral. It was denied, or withdrew its application to by the Many, La.-based $1.2 billion Sabine Bank (link) announced in April 2024.

There is no evidence in the Space City merger that the CUD in the words of mission acted: to safeguard the public interest, protect the interests of credit union members and promote public confidence in credit unions.

Is this the Commission’s View of the Future of Credit Unions in Texas?

In September 17 and 18, 2024 Houston Business Journal interviews, TDECU CEO Johnson was clear about his ambitions for the credit union and the coop system’s future:

TDECU — soon to be Space City Financial following its merger with Space City Credit Union — wants to become a top-20 credit union in the U.S. by 2034, President and CEO Isaac Johnson said. . .Iowa-based GreenState Credit Union is currently the 20th-largest credit union with $11.1 billion in assets, according to U.S. News & World Report. 

To reach its goal, Johnson said the credit union needs to continue focusing on inorganic growth and “take some leaps.” . .“To get to $11 billion within the next 10 years, it’s possible to do it through just organic growth, but upon studying those top credit unions, most of them got there through acquisitions, mergers and organic growth,” Johnson told the Houston Business Journal. “We cannot double down and just do it organically.”. . .

“The merger with Space City Credit Union is a signal to other credit unions that TDECU is open to additional mergers and acquisitions,” Johnson said. “The credit union industry is consolidating as regulatory burdens and other costs increase, a trend Johnson expects to accelerate. TDECU plans to be active in that environment,” he said. . .

“For Space City Credit Union, the merger is ideal from a succession-planning perspective as President and CEO Craig Rohden prepares to retire after leading the organization for 30 years. It also allows both credit unions to grow and scale at a time when regulatory burdens and the costs to compete with other financial institutions are increasing,” Johnson said. . .

“TDECU will focus on closing its merger with Space City Credit Union and acquisition of Sabine State Bank & Trust before making any more deals, Johnson added.

“As the credit union industry continues to shrink — and generally the banking industry continues to consolidate — we want to be that beacon to say, ‘We would like to partner with you. . .” Johnson said. . .

“Credit unions have historically focused on consumer lending, so having “credit union” in the brand implies a limited scope of what the organization may be able to do. With the word “financial,” it more accurately represents the full range of products and services TDECU offers,” Johnson said. . . .

“We must grow. If we do not grow, we will become one of those credit unions that are consumed or have decreasing membership,” Johnson said. “What we’re doing now is ensuring that we have an ongoing credit union for the next 100 years.”

Stand Up or ???? 

CEO Johnson’s  point of view is certainly one of several animating credit union leaders today.   What will the commission say about this overt institutional goal devoid of any reference to members or their best interests. Just institutional glory, dominance and national growth.  It should be noted that TDECU has its third board chair in the last four years.

Tomorrow’s Commission meeting will give Texas credit unions insight into the policy of their state regulator.  Will  Johnson’s philosophy of grow or die be addressed?  Or will the commission embrace the words of CEO Holbrook , “it’s time for us to stand up again.”

 Information to join the meeting:

The Credit Union Department Commission Meeting is scheduled for Friday, July 18, 2025 at 9:00 AM  (central time zone)

The Agenda (link)

Microsoft Teams Need help?

Join the meeting now

Meeting ID: 234 324 784 323 7

Passcode: Tr2qH72w

Dial in by phone

+1 936-213-5778 United States, Waller

Find a local number

Phone conference ID: 773 558 893#

 

 

 

 

 

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An Important History Note

From Garrison Keillor’s Writer’s Almanac on July 15,  2014, i.e. eleven years ago.

July 15 is the birthday of microbiologist Thomas Francis Jr., born in Gas City, Indiana (1900). T.F., as he was known to his friends, grew up in western Pennsylvania and studied medicine at Yale. He graduated in 1925. His early research projects involved bacterial pneumonia, but he was particularly interested in the study of viruses. He was the first American to isolate the human influenza virus.

He joined the University of Michigan in its newly formed School of Public Health in 1941. It was here that he developed the first flu vaccine, which used the dead influenza virus to provoke an immune response in the human body. Francis had discovered in 1940 that there was more than one kind of flu virus. That’s why epidemiologists release a different flu vaccine every year, based on their predictions of which strains will be dominant. It’s estimated that Francis’s flu vaccine has directly saved more than a million lives.

While he was teaching at the University of Michigan, Francis established a virology lab to study viruses. One of his first students in the lab was Jonas Salk. Francis taught his student how to develop vaccines, and Salk eventually went on to develop a vaccine against polio. Francis designed the massive nationwide field trial that proved the effectiveness and safety of Salk’s vaccine.

Francis also founded the University of Michigan’s Department of Epidemiology, to study how diseases are spread through populations and develop ways of controlling outbreaks. Francis said: “Epidemiology must constantly seek imaginative and ingenious teachers and scholars to create a new genre of medical ecologists who, with both the fine sensitivity of the scientific artist and the broad perception of the community sculptor, can interpret the interplay of forces which result in disease.”

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The Power of Tradition: The Lesson of Longevity

One of the immediate consequences of mergers of sound credit unions is the loss of their legacy and traditions created by generations of member service.

Often the continuing credit union tries to ameliorate  this wasting  by temporarily retaining the old name while consolidating operations and leadership under outside direction.  And shortly thereafter comes the new brand.

Terms such as “goodwill” acknowledge the real value that the relationships and roles of long-serving firms bring their communities in addition to  their economic contributions.

Family vs Public Business Success

A July 11, 2025 article in Bloomberg Opinion by Adrian Wooldridge suggests that the recognition and respect for a firm’s history may be a critical factors in the long term survival of family business versus that of most public companies.

Below are a few excerpts from his article Europe’s Best Family Firms Have a Secret Weapon Money Can’t Buy.  

Tradition can’t be bought. It’s fashionable in business circles to pass over Europe with a sigh. But the best European family companies have survived everything history can throw at them, and the majority of businesses that have survived for 200-plus years are European,

Part of the answer lies in longevity: The best European family companies have survived plagues, famines, world wars, recessions, revolutions — and continue to thrive. The Henokiens Association, an international club of 57 family businesses that have survived for at least 200 years, includes only ten non-European members, all Japanese. . .

The typical life expectancy of any company, family or non-family, is only a couple of decades, and is falling. What explains the longevity of the best European family businesses? . . .

Tradition. Tradition is a unique resource which newer firms cannot match regardless of how much money they have: Thousands of companies produce wine, for example, but only the Frescobaldis in Tuscany can boast that their ancestor, Dino, rescued the first seven Cantos of Dante’s Divine Comedy from destruction.

Tradition provides impossible to quantify corporate benefits: pride in collective achievements; the self-confidence to make difficult decisions; and, perhaps most important of all, a sense of perspective–family companies are much better than public companies at resisting the pressure of quarterly results for long-term results.

For their part, big public companies often suffer from a “crisis of banality”: in a world that is hungry for meaning, all too many of them adopt identical virtue-signaling language or forgettable names or logos. . .

They should study the art of storytelling practiced by the likes of Berry Bros. & Rudd founded in 1698 selling coffee.  Even as some American tourists like to lament Europe’s supposed decline into a collection of monuments without any economic prospects, some of those monuments contain clever and innovative companies that will continue to thrive even after the giants of Silicon Valley have gone the way of Shelley’s Ozymandias.

The poem’s final stanza:

And on the pedestal, these words appear:
My name is Ozymandias, King of Kings;
Look on my Works, ye Mighty, and despair!
Nothing beside remains. Round the decay
Of that colossal Wreck, boundless and bare
The lone and level sands stretch far away.”
My question: Is the idea that credit unions are like family more powerful than we might at first realize?
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Not Your Typical Strategic Planning Question

Lots of talk about strategy is happening now.  For 2026 and beyond.

This public dialogue asks a different question from those posed in traditional planning retreats.

How would you answer?  It could make a difference in your firm’s priorities.

 

Question from a CEO:  Have we become so changed that our shared purpose and collective action is no longer a movement, but instead an industry like so many other market driven and profit making organizations? Even our credit union leaders and advocates refer to us as an industry in the daily rags that I read each morning. What are we now? Are we no longer a movement, whose mission is socially driven?

Response: Ancin Cooley, Principal, Synergy Credit Union Consulting,Inc

To answer your heartfelt question directly:

We are no longer a movement.

What we now have is something far more compromised. What remains today is a quasi-cooperative system—held together by legacy language (”We stand for hashtag#mainstreet values”), but driven mainly by pure capitalists in cooperative costumes.

If you pay close attention, you’ll notice something strange: No one publicly defends these credit union mergers.

Not on video. Not on LinkedIn. Not at conferences.

Why? Because there’s an inherent contradiction between what’s happening and what a cooperative is.

But here’s the truth: this trajectory could shift swiftly if just 20 to 30 credit union CEOs joined their league boards and made their positions known.

Yes, it might cost some relationships. But if someone can’t respect your position, you were never friends in the first place. Your friendship was predicated on compliance. So what if you don’t get invited to DC to take your fourth picture with your local congressman?

If you’re doing right by your members, community, and credit union, those congresspeople will come to your office, not the other way around.

Impact draws attention. Service builds power.

 

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Summer Thoughts and Sights

Growing up our family lived in small towns surrounded by farms.  In suumer the lightning bugs would glow  as tiny yellow flying dots in the warm nights after dark.  They flew their courses at our level of play.

We would take the quart glass Bell jars used for canning vegetables, punch air holes in the metal covers and put in some cut grass. Then we would catch the yellow flickering, flying tiny creatures with our hands. Put them in the jar. We’d take the jars of small nightlights to our bedroom to watch them blink on and off  till sleep.

Frost had a different image in mind.

Fireflies in the Garden

by Robert Frost

Here come real stars to fill the upper skies,

And here on earth come emulating flies,

That though they never equal stars in size,

(And they were never really stars at heart)

Achieve at times a very star-like start.

Only, of course, they can’t sustain the part.

Summer is vacation time.  School is out.  We look forward to swimming pools opening, time off for holidays and occasionally the ultimate challenge, what are we going to do today?

For Mary Oliver, summer’s hiatus from fixed schedules is a time to ask, what is it you plan to do with  life?

The Summer Day

by Mary Oliver

Who made the world?

Who made the swan, and the black bear?

Who made the grasshopper?

This grasshopper, I mean –

the one who has flung herself out of the grass,

the one who is eating sugar out of my hand,

who is moving her jaws back and forth instead of up and down –

who is gazing around with her enormous and complicated eyes.

Now she lifts her pale forearms and thoroughly washes her face.

Now she snaps her wings open, and floats away.

I don’t know exactly what a prayer is.

I do know how to pay attention, how to fall down

into the grass, how to kneel down in the grass,

how to be idle and blessed, how to stroll through the fields,

which is what I have been doing all day.

Tell me, what else should I have done?

Doesn’t everything die at last, and too soon?

Tell me, what is it you plan to do

with your one wild and precious life? 

Summer Colors

My oldest azalea planted over 40 years ago is the last to bloom in mid-June protected by the shade of a tall maple and redbud trees.   Yes, those are two topiary steeds guarding our front door in the background.

Best year yet for gladiolas.  The bulbs take several seasons to reach their full glory at a height of over 6 feet.

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A Past and Present Story to Make Every CU Member Proud

A three year old credit union with just 8,000 members received the movement’s highest honor for “Outstanding Achievement” in the 2003 Herb Wegner annual award dinner.

Chartered in February of 2000, in three years the credit union had only $11.0 million in assets. But it was powered by passion, vision and a vital mission.

This excerpt from the Night of Stars video is Chairman John Herrera’s acceptance speech.

In just eleven minutes it is a timeless and powerful message for the difference credit unions make for members, communities and the country.

Several moments to note:

  • The size of the credit union’s “family”on stage with him;
  • His gratitude to the many credit union supporters in North Carolina who helped the startup–at one point he asks those in the audience to stand.
  • Two iconic credit union leaders on stage with his board and staff, Martin Eakes and Jim Blaine (around minute 5:00) who played special roles in this new charter’s progress.
  • His comments on the needs of the country’s 28 million new immigrants: “there are no illegal humans.” (around minute 9:00).  A message for today.

(https://www.youtube.com/watch?v=T9UfOhtljws)

This talk is as relevant now as it was in 2003. It shows the collaborative capability of credit unions to respond to critical human needs.  Service was an essential factor–the staff speaks five languages and although when hours are from 7:00am to 7:00 pm on Mondays and Fridays, the credit union doesn’t close till everyone in line is served.

Latino Community’s Example Today

For the next two decades, Latino Community has been one of the fastest growing credit unions in America.

At March 2025, Latino reported 133,000 members served by 320 employees in 15 branches.   It has a loan to share ratio of 114% with 75% of the portfolio in real estate loans.  Its net worth ratio is 22% augmented by $99 million of subordinated debt.  Without the debt, the equity ratio would be 13.5%.

New credit unions are rare.  Soul Community FCU, chartered by NCUA in December 2024, was closed six months later by the agency.

The capacity to begin new credit unions still exists.  The needs of individuals and communities is as great or maybe even greater in terms of the nation’s wealth inequality.

What is lacking is the spirit at many levels in the coop system to join with and support the passions of the approximately 100 new charter applicants and/or inquiries resting at NCUA.

One of the persons who assisted the Latino start up was Jim Blaine, then CEO at SECU.  He describes the reason this effort succeeded as follows:

In 2000, SECU joined with a host of community activists, churches (the local Catholic Bishop), state/federal regulators (especially NCUA’s RD Alonzo Swann), and numerous other credit unions to help charter Latino Community Credit Union. It was a remarkable cooperative effort. Our unserved and financially at-risk Latino neighbors were the challenge, community was the answer. 

Each group brought a unique expertise but shared the same purpose. SECU provided the operational systems and “back office” support which gave the staff time to learn and grow – time to focus on their community – without the threat of failure.

SECU also sought low-cost deposits for lending from credit unions nationwide; the credit union community responded with over $10 million. Folks often miss what’s most important about LCCU.  Latino yes, but  a credit union community most! 

Would it be so today!  Go back and listen to the last two minutes again for a message that should  be close to everyone’s heart now.

 

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Putting the Members and Democractic Practice into the Merger Free-for-All

The credit union system faces a major challenge to its values and identity in the capitalist-inspired takeovers via merger of financially strong, long-serving credit unions.

The process has been distorted by leaders with member-owners with no meaningful role at any step.  The so-called member vote is a charade.  But regulators are scared, intimidated or just simply impotent to stop the self-dealing, self-enrichment  and sometimes, outright corrupt practices.  They hold a fig leaf, well the members voted for it,  to hide their private unexamined approvals of the official disclosures required in the Member Notice.

What is to be done?  There is one very simple step in the process that would both address the lack of transparency and the absence of any real member-owner say.

The Failed Merger Process

When the updated voluntary merger rule was passed in2017, disclosures of special payments was supposed to fix the outright self-dealing by senior managers used to induce combinations of strong charters.  See The Art of the Steal.

But the process was fundamentally flawed.  When implementing the rule, NCUA placed itself in the sole role of protecting the members’ “best interests.” It gives final approval to the required disclosure in the members’ notice  letter. This is before members have any input let alone facts about the reasons and plans for the transaction.

Today, two healthy credit unon CEO’s announce their intent to merge for a brighter future, but then the process goes backstage.  Occasionally there is a general member update  or two several months in, saying the credit unions are working on it.  The IT in reality is getting regulatory sign off on what to tell the members when calling for a vote.

The  NCUA is in fact acting as an  in loco parentis role about what members should know to approve their charter transfer.  The minimal mostly marketing information in the official Member Notice, will be  the first and only time members learn any details.  But the CEO’s now have the OK to proceed with the vote knowing this content is all they have to say as the regulators have signed-off on the transaction.

These Notice disclosures are proforma generalizations, a listing of locations and  with merger reasons sometimes copied from a previous application.  There is no meaningful financial or business content that a concerned owner might need to have for an informed decision.

If members are upset when the required self-dealing information is presented, they are effectively powerless to do anything about it.  It is just individuals fighting an entrenched leadership with all the resources needing only a margin of one vote and the deed is done.  99% of mergers that go to a vote are approved.

These are not votes about a choice. Rather they are presented as a mere administrative act to ratify  decisions already made and approved by those in authority.  Decisions made without any owner input or options in the matter.

There is no secret about the lack of any member role or benefit in the majority of these ;private deals.  The credit union merger arena has become a Roman amphitheater where  lions and beasts prey on unarmed Christians.

But there is one simple event  that if added to the merger steps could change the entire process, restore opportunity for member participation, and make the member voting process more informed and democratic.

Resolving he Merger Madness

The solution: require that within 10 days of mailing the Member Notice, the credit union hold a public hearing open to all members in person and online.  The CEO and board initiating the merger could present their plan and attendees could ask questions.  Members, the press, community organizations, sponsors and other interested parties would have a right to participate.

The hearing would be led by a hearing officer appointed by the regulator who would moderate the agenda and make a record of the meeting, to be available for all to access.  This public step would be required for all credit unions that have at least 7% net worth.

Whose idea is this?  It’s NCUA’s.   On July 3rd the agency posted a notice of a public hearing for an FOM request.  The notice outlines very elaborate procedures, registrations, deadlines etc.  However a merger hearing need not be this bureaucratic. Credit unions are used to holding member meetings as a standard bylaw annual requirement.  The only difference is that this event would have a neutral moderator and be open to all members and the public.

Public meetings with those in positions of leadership is part of America’s democratic tradition.

NCUA’s Pioneering Example

NCUA itself inaugurated the concept of open meetings, not just in DC, but across the country.

On May 20, 1982 the NCUA broad met in Boston’s Faneuil Hall marking the first NCUA meeting held outside DC.  This was part of Chairman Callahan’s grass roots effort to bring the agency closer to the credit unions and members it supervises.

These on the road meetings continued throughout Callahan’s tenure.  The second meeting was in July 1982 in conjunction with NAFCU’s Annual Members Meeting in Chicago, Ill.  It also was the week after the largest bank failure, Penn Square, to that point in FDIC history.

NCUA staff not only participated in this monthly board meeting but also held an open press conference following to answer questions on credit union’s exposure to  uninsured CD’s placed with the bank.  I can still remember the first press question:   Does the Penn Square failure  mean NCUA will propose a rule to limited credit union investments to the $100,000 insured limit?  It was a directed at the deregulation policy of the NCUA.  The answer was no.  But we also outlined the help that would be provided by the CLF and NCUSIF 208 assistance if necessary.

These public board meetings were held in each of the six regions on a rotating basis.  They often coincided with League Annual Meetings or other national industry conferences.  Regional senior staff were part of the presentations.  The local press was notified. Sometimes a new charter would be presented to organizers in person.

The effort was to promote the democratic, member owned system in all of its multiple  capacities.   It  introduced NCUA and the credit union option to the public press in cities across America. For many members, it was their only chance to meet and chat with NCUA staff in open dialogue.

Credit Unions:  Made in America

Public meetings are part of America’s democratic character and practice.  Norman Rockwell captured this town hall spirit in his Freedom of Speech, a part of the Four Freedom’s WW II poster.

Public hearings enable public accountability.   The “member special meeting” that wraps up the merger process on the last day of voting is anything but a public event.  The votes are mostly by mail ballot sent along with the initial Meeting Notice—urging a Yes vote.  There is no way for persons to learn or hear the details that would make the process meaningful with different points of view.

Public hearings are the easiest, most immediate and democratic way for members-owners have a say about whether their charter and relationships should be sold to a third party.  They require no NCUA board action.

Members should have the chance to play a real role in this process and not merely  passive ratifiers of authority.

Whether a credit union believes that mergers are  inevitable or harmful to the future because of the shenanigans  now occurring, everyone should be in favor of giving the owners a real voice in this live or die decision.  Let the Regions get on with it.

 

 

 

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Hanscom FCU’s $50 Million Bet: Is This Financially Sound and in Members’ Best Interest?

Summary: Hanscom FCU’s proposed bank purchase raises questions of financial and business soundness, transparency and whether it  benefits  the credit union’s member-owners.  While writing this follow-up, I became aware of a unique group of member-owners who for  over 18 months had been documenting and asking hard questions of the credit union’s board and management about the credit union’s performance. This included the bank purchase.  The group’s name is Hanscom Loyal.  I reviewed their communications. Their ongoing efforts, which are much broader than the bank transaction, is what makes this situation a valuable example for all credit unions.

On February 7, 2025, I wrote a post, Time to Ask WHY? about the announced purchase of The Peoples Bank ($306 million), in Chestertown, MD, by Hanscom Federal Credit Union ($1.8 Billion), headquartered on Hanscom AFB in Massachusetts, with its operations center in Littleton, MA.

This sale was singled out in a Washington Post opinion article by the former FDIC Chair Sheila Bair as an example of credit unions’ tax-free status thriving at public expense. 

The more important question: Is this a wise, sound transaction in the member-owners of Hanscom FCU’s best interest?

Why a $50 Million Price?

The Peoples Bank announced the $50 million price in their 2024 Annual Report. Hanscom FCU has released no information other than a single press release from December 20, 2024 about the purchase.

Because Hanscom FCU will be paying the 619 owners of Peoples $50 million in cash in return for the firm’s assets and liabilities, the first question should be,  “Is this price justified?”

Because Peoples is a public company with their stock traded daily (PEBC), we have much published data on their performance.  There are several ways to analyze this purchase amount.

On a price-to-12-month earnings ratio, the sale price amount is 15 times the bank’s $3.3 million net income in 2024. That is, if current earnings continue, the time to earn back the $50 million cash outlay could be as high as 15 years.

A second ratio is price-to-book value. The $50 million is 1.4 times, or a premium of $15 million, on the net equity reported in the audited statements on December 31, 2024.

Because the bank’s stock price is traded, we can compare the market’s valuation (market cap) before and after the December 20, 2024, purchase announcement. Prior to the release, the stock had traded in the $31 to $33 price range for a total market capital value of approximately $24 million (729K shares outstanding). That is, it traded below book value. Upon news of the proposed sale, the stock price jumped to $60 per share and closed last week at $58 for market value of $42.2 million. That market cap is still less than the $50 million being offered by Hanscom FCU.

These ratios will be subject to valuation and other adjustments. For example, since Hanscom FCU pays no federal or state income tax, should that amount ($960,153 in 2024) be added to projected earnings? Or, are the balance sheet assets of good will and deferred income taxes of any value to a tax-exempt credit union?

The bottom line is that the 619 bank shareholders are getting a good deal. We can see why they would want this sale to go through. The question is whether this transaction is in the best interest of the member-owners of Hanscom FCU. Their $50 million cash outlay to the bank’s owners is 22 times the credit union’s 2024 net income.

What Is the Business Case?

There has been no information from Hanscom FCU other than the press release referenced earlier to support this $50 million investment. In that release, CEO Peter Rice promises more investments in Peoples: “Through this combination, we expect to expand Peoples Bank’s ability to invest in its communities across Kent, Queen Anne’s and Talbot Counties.”

Other than cash, what expertise does Hanscom FCU bring to this 110-year-old community bank serving three mostly rural counties in Maryland? How do Peoples’ business priorities align with Hanscom FCU’s strategy? Its 15 locations are mainly concentrated around metro Boston, with one small branch in a restricted access building at MITRE in McLean, VA. The three rural Maryland counties Peoples serves are 400 miles away from Boston in a very different demographic and economic setting.

Peoples has two business lines. As a community bank, only 0.5% of its loans are to consumers ($872K), 50% to residential real estate and 38% to commercial real estate, development and general commercial loans. The commercial loans include agriculture for land, cattle, ag equipment and waterman loans for people who make a living from the ocean and farming. This traditional, long-time commercially focused bank contributed 64% of 2024 net income and managed $301 million in assets.

Their insurance segment is managed by a subsidiary, Fleetwood Insurance Group, and offers a full range of insurance coverage to businesses and consumers. The business has two offices, contributed 36% of the holding company’s 2024 net income, and managed just $7.8 million of assets before intersegment eliminations.

According to Hanscom FCU’s chairperson Teresa Conrad’s quote in the May 29, 2025, press release, this business was an important part of the acquisition: “The Hanscom team is also finalizing the Peoples Bank integration, ensuring a seamless transition and united experience for every member. With the Peoples Bank acquisition, we will fill a critical gap in our financial offerings with the addition of a new insurance company that offers a robust set of new products and services.”

There are two major issues to this goal of “filling a critical financial gap in offerings.” The first, how does a two-office insurance agency in rural Maryland serving small towns and businesses with long-time, local relationships compete in greater Boston’s saturated insurance market? Why not just buy an already established agency in that market?

Secondly, that “seamless transition” is not in the business plan announced in the December press release: “Following the close of the transaction, Peoples Bank branches will be regionally managed and continue to operate under the same name and brand. The Peoples Bancorp. Inc.’s common stock will no longer be listed on any public market.”

Instead of “seamless,” the intent is to continue with the Peoples name and brand and business model. Not only is this a dubious legal way for DBA positioning, but it also begs the question of any operating savings from inter-company efficiencies. It suggests that post transaction, the financial operations will become a standalone effort drawing more cash from Hanscom FCU as a “parent” company.

The business case is completely undocumented.  It is  a collection of generalities that suggest little effort for how the future of the two organizations will be managed. That should concern Hanscom FCU’s member-owners.

The People Bank’s 619 owners have their $50 million in cash while the credit union’s 100,000+ member-owners are left to ask: Can their leadership actually manage an acceptable a return on this investment of their funds?

This purchase appears to be a very risky, big time financial wager with the members’ money.  Whatever the price tag, if as presened below, Hanscom is unable to achieve a stable, minimum return on the assets it now has, then the whole insitution-and its member owners-suffers by just buying more at a premium price.

Hanscom FCU’s Financial Trends

I  reviewed the track record of Hanscom FCU under CEO Peter Rice, who replaced the long-serving David Sprague in 2022.  Sprague’s service was profiled in this press release:

Sprague has been Hanscom FCU’s top executive since 1996, a well-loved and respected senior leader managing over 250 employees. The credit union’s assets have grown to $1.7 billion, and membership has more than quadrupled to over 90,000 members during his 25-year tenure. He has steered Hanscom FCU to become the fifth largest credit union in Massachusetts.

Since year-end 2021, the final year of Sprague’s tenure, the following are the major firm trends under Rice for 2022 through Q1 2025 or three and a quarter years performance:

  • Shares have declined from $1.610 billion to $1.560 billion (Q1 2025)
  • Loans have increased slightly from $1.405 billion to $1.497 billion (Q1 2025)
  • Employees (FTE) have fallen a bit from 243 to 230
  • Number of branches has fallen from 22 to 15
  • Membership has grown from 91,577 to 102,714
  • Net worth ratio has increased 9.59% to 11.66%
  • ROA in 2021 was 0.80% and for full year 2024, 0.13%

The December 2024 bank purchase announcement coincided with the poorest financial performance in Hanscom FCU’s recent history. Annual growth in shares and loans was negative. The net income of $2.3 million (0.13% ROA) was down 90% from the $23.2 million in 2023.  Hanscom FCU is five times the asset size of Peoples but earned $1.0 million less than the bank in 2024.

These negative balance sheet growth trends continued in Q1 2025. That quarter’s earnings of $952,000 (0.21% ROA) were down 66% from the prior year’s first quarter.  Peoples Bank again had higher net income, even after reserving for taxes.

The most concerning first quarter outcome was HFCU’s $10.8 million in net charge offs, up 642% from the $1.5 million in 2024’s quarter.

In sum, the new CEO’s leadership in the last three years has been marked by inconsistent performance and by a sharp decline in critical financial indicators over the last 15 months.

This erratic performance raises two questions. Why is this decline occurring? With this uncertain track record, what justifies sending $50 million to the Peoples Bank owners, to purchase a firm that would seem to have no geographic, strategic, or business similarities to Hanscom FCU’s core market?

Why the Instability in Hanscom’s Financial Performance?

Here are the last 12 months of Hanscom FCU’s financial trends compared to all credit unions in the $1 to $5 billion peer group range. This comparison shows that the industry continues to grow positively on key balance sheet and income statement indicators, but not Hanscom FCU. Why?

The inconsistent trends plus the current declines in operational outcomes raise the questions about the credit union’s leadership, the CEO, and senior management, along with the Board and Supervisory Committee’s oversight of processes and procedures.

For example, one looks in vain for any transparency or explanation to Hanscom FCU’s members or the public about this $50 million transaction. The Peoples Bank owners get a full confidential term sheet to approve the sale; the buyers paying the bill are given nothing.

I have not been able to locate a 2024 Annual Report or detailed information about the annual meeting for Hanscom FCU members, apart from a brief website announcement. There also does not appear to be any readily available confirmation of the election of directors or minutes from previous meetings. The May 29 chairperson’s statement includes no context to understand how or to whom the message was intended. It is full of marketing and PR spin about community activity, but no mention of Hanscom’s steep financial decline.

Those Closest to the Action Speak Up

In response to my February post on the Peoples Bank purchase, I received an email from a group called Hanscom Loyal. They describe themselves as a cohort of approximately 40 current and former credit union employees, many also member-owners, deeply concerned about Hanscom FCU’s leadership.

They did not go public with their concerns. Instead, they sent detailed communications, including letters and emails, to Hanscom FCU’s individual board members, Supervisory Committee members, and copies to NCUA examiners. The FDIC was copied after the bank purchase was announced.

These multiple communications contain specific examples of violations of bylaws, board, and credit union policy, as well as questionable personnel and account transaction events. As these employees saw  and experienced actions of senior management and the Board’s role, if any, the group alerted those with authority over the institution to their concerns. They did not act like whistleblowers creating public alarm. They simply asked those in positions of responsibility to investigate the factual events they listed.

Over 18 months they documented an absence of internal controls, lack of following in-place processes, and regulatory compliance failures. Their examples included specific instances of improper transactions with member accounts. They included examples of incorrect information in web and other communications. One example they provided was a credit card promotion mailer stating that Hanscom FCU was FDIC insured.

Leadership and Staff Turnover

Their primary concern focused on the continued turnover and forced departures of experienced credit union personnel. The majority of Sprague’s senior team with experience has left the credit union. In instances, the resignation demand was presented as a choice: voluntarily resign to retain benefits or immediate dismissal with none.

On March 25, 2025, one employee filed suit for her dismissal. Another has submitted a formal complaint to the Massachusetts Attorney General’s Office concerning unfair wage withholding.

Such turnover in the past three years, estimated as high as 50%, is not normal. Even Hanscom FCU’s chairperson in her 2024 summary  remarks acknowledges 44 internal promotions within a constant staff size of 230. This continuing exodus not only undermines morale, but it also can result in new hires or promotions without relevant experience and knowledge for the new positions.

Such internal turmoil undermines institutional performance. When informed of such institutional problems by outsiders, often the response by those in authority is to dismiss a group like Hanscom Loyal as disgruntled former employees or “troublemakers.”

Certainly, all members would or should be disappointed with these performance shortcomings.  This group invested great effort to document wide-ranging examples of leadership and institutional shortcomings, with facts, not opinions. Their stated goal is to return Hanscom FCU to its prior level of member focus and service.

Both FDIC and NCUA have acknowledged receiving Hanscom Loyal’s specific detailed complaints of the past 18 months. One of NCUA’s responses on August 21, 2024, included the following:

I just want to confirm receipt and assure you we take these concerns seriously.  As you are aware, we are responsible for enforcing certain rules and regulations.  Employment matters, in general, are not under our purview and are governed by state law.  As frustrating as those issues might be, they are not matters we regulate or enforce.  Those are more matters for the credit union’s Board and your legal counsel, should you choose that route.  

The Regulator’s Oversight

NCUA’s characterizing these detailed concerns as merely employment matters completely misrepresents the internal management issues that Hanscom Loyal described in detail. Suggesting these events are only for the Board and Hanscom Loyal’s legal counsel to address dismisses the ‘M’ for management, in the NCUA’s CAMELS rating.  This exam component specifically assesses senior management’s performance, firm governance, and procedural oversight, including member annual meetings.

Hanscom FCU’s declining financial performance, lack of routine transparency with members, and the Board and Supervisory Committee’s failure to address documented concerns suggest a dysfunctional management team and a board and supervisory committee unable or unwilling to fulfill their responsibilities. To propose that member-owners may need to hire legal counsel is a parallel failure by NCUA to acknowledge their supervisory obligations.

Should Hanscom FCU’s $50 million proposal to purchase a bank be approved by NCUA? This effort to acquire a bank 400 miles away — without a clear business plan demonstrating any benefit for its member-owners — appears to be another example of poor management judgment.  Moreover, paying out $50 million in cash adds significant financial, operational, and market risk to the credit union, already in a financial stall.

This transaction does not appear to be a carefully considered strategic initiative; instead, it appears to be a reaction to an opportunistic proposal from brokers eager to strike a deal with a cash-rich credit union.

If the 729,000 shares held by Peoples’ 619 shareholders receive the same pro rata of the $50 million purchase, the per-share price would be $69 dollars. That is more than double the bank’s market value before the offer. So how does this transaction serve Hanscom FCU’s member-owners whose funds would pay out the bank’s owners?

What’s Next? Who Will Own Responsibility for the Credit Union?

The Hanscom Loyal group has provided Hanscom FCU’s Board of Directors, Supervisory Committee, and federal regulators with details of documented mismanagement that directly affect the credit union’s financial performance. This is most evident in high employee turnover and specific examples of questionable practices that have been shared.

Hanscom Loyal has acted as member-owners should.  They collected facts and brought these documented issues to the appropriate parties. Despite NCUA’s onsite annual supervisory exam and the Board’s awareness of the group’s forwarded operational issues for over a year, Hanscom FCU’s leadership nevertheless proceeded with the Peoples Bank purchase announcement in December 2024, approving it unanimously.

It should be clear to even a casual observer that Hanscom FCU’s member-owners would be best served if the credit union first put its own house in order. Spending $50 million now sends a message to concerned members that the cooperative system is not working for them. Annual meetings appear, at best, closed in-house affairs with no transparency for the owners to become involved.

NCUA’s cursory advice to members to hire legal counsel if they receive no response from the credit union is an abdication of their responsibility to ensure the safe and sound operation of the credit unions they examine.

The NCUA’s August 21, 2024, email acknowledgement to Hanscom Loyal’s list of concerns included this:

We will certainly consider any matters violating areas we are charged with overseeing, as well as evidence of fraud.  All examination results are confidential and cannot be shared.  

I encourage you to submit the matters below to the Supervisory Committee and the Board of Directors of the credit union, if you haven’t already.  The Supervisory Committee is the “watchdog” of the credit union and is responsible for independently investigating such complaints.

What are credit union member-owners to do when there is no Supervisory Committee watchdog responding to their concerns, no Board elections that are open to all members, and no meaningful evidence that NCUA exams address  either specific operational issues or an institution’s leadership shortcomings?

Instead the opposite message  is sent to member-owners when the credit announces it is investing $50 million to buy banking assets in a rural market 400 miles distant.

If anyone with  internal responsibility for the credit union or NCUA in its external examination findings had given any credibility to the group’s many messages, this bank purchase offer should not have seen the light of day.

Credit union leaders’ failures to respond  and impotent regulatory oversight is, unfortunately, not uncommon in the credit union system.  In previous blogs I have provided examples such as yesterday’s Space City merger with TDECU.  Individual members spoke up, wrote their credit union and regulators with deep concerns, but were treated as “nobodies.”

The difference in this case is Hanscom Loyal’s organized effort, the volume of factual examples and a commitment going on two years to make things right.  They are doing this in the right way not in public outbursts.

As uncomfortable as this example may be for some, every credit union would benefit from member-owners who believe in their credit union so deeply that they are giving time, effort and energy to make their coop better.

Hanscom FCU’s  entire operating context suggests that this proposed bank purchase should be dropped immediately.  The leadership issues would benefit from having persons with the expertise and commitment of Hanscom Loyal added to internal oversight roles.

Everyone’s overarching goal should be to restore the credit union as a true cooperative whose priorities serve member-owners best interests, first and always.

Note: In writing this follow-up, I have reached out to both Hanscom FCU and The Peoples Bank but have not had a response. Should I receive responses, I will update this post. The Hanscom Loyal group’s email is: hanscomloyal@proton.me

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The Rest of the Story:  How State and Federal Regulators Failed to Protect Space City Members in the TDECU Merger

This past weekend a Houston Business Journal article noted a 30-day gap in TDECU’s disclosure of its failure to receive regulatory approval for its  Sabine Bank purchase versus the date of the Bank’s online post.  During this period TDECU finalized the merger of Space City CU.  During the public controversy, regulators feigned impotence to do anything about this deeply flawed transaction.

To understand the significance of this regulatory inaction,  it is helpful to recall some circumstances of this merger travesty.

On May 25th, I posted a two part analysis of the proposed merger of the $147 million Space City Credit Union with the $4.8 billion TEDCU.

The Member Notice was mailed on March 28th, providing the public for the first time the details of payments to senior staff. All member voting ended May 14th.   The result was 862 of the 12,000 eligible members voted with 82% for and 18% against.   End of story?

A Cooperative Merger Tragedy

I summarized this sleazy event as follows:  This self-dealing transaction marked by conflicts of interest, lax board oversight and member manipulation is the latest example of internal corruption in the $2.3 trillion cooperative system. . . State and federal regulators seem oblivious or powerless to stop this internal pillaging.

Here were some of the merger specifics. In distributing the surplus from Space City’s 14.6% net worth, the top three employees received $6.750 million of which $4.0 million went to the CEO. He already had a cu paid retirement plan and a $3.250 split dollar life insurance plan.  This $4.0 million total was equal to 53% of the entire retained earnings of the credit union in its 60-year history!

Two components of the total payments to the CEO and COO came directly from TDECU, not Space City’s reserves.  This total of $850,000, approved byTDECU’s CEO and board, was an  outright “gratuity.”  What was the fiduciary responsibility of these two  persons with direct responsibility for arranging the merger and its approval by members when receiving direct payments by both parties?

To top off these senior staff incentives, members were given a “bonus” dividend from their collective savings.  However, it was designed so that members with the least amounts of shares  received the greatest percent return.  Those who had the most to lose received the lowest percentage.  Specifically all members with $289 in savings or less, would receive $100 bonus.  If the vote were NO, you get nothing.

In addition to this blatant self-dealing, the basic concern with this merger was that the financial performance of TDECU, the continuing credit union.  For the prior  15 months its financial performance had deteriorated.  It reported a loss in the first quarter of 2025, and a troubled loan portfolio with 2.01% delinquency (up from 1.13% prior year) and an allowance coverage ratio one third of the peer average.  Its balance sheet loan and share  growth had flatlined under the new CEO.

Most importantly to TDECU’s future ambitions, it had announced in April 2024  the purchase of the Many, LA based $1.2 billion Sabine Bank.  A  “definitive acquisition agreement” was in place with the transaction to be completed in early 2025.

“TDECU is on a growth journey to expand across the state of Texas and beyond,” the credit union’s CEO, Isaac Johnson stated.

The Outcome and Regulatory Silence

When askng the state and federal credit union regulators, when and who had approved the merger, these were the replies:

From the Texas Commission:  preliminary approval was given by Department (Commissioner) on February 6, 2025. . .

From the NCUA:  The merger was approved by Southern Regional Director Keith Morton on March 6. . .

So long before the Space City members knew any details of the merger (Member Notice dated March 28), both credit union CEO’s knew their two regulators had approved their self-serving actions. The financial statements with the Notice were also six months old, September 2024, not even for the full 2024 yearend.

The members knew nothing until receiving the March 28 Notice, but the credit union leaders who privately put it together,  knew they had the deal approved.

All the controversy after the members and public learned of these details went for naught.  The regulators had said OK. It was all over but the shouting, which occurred in June when the merger was completed.

So at this point the merger  just seemed another example of regulatory ineptitude, indifference or perhaps other factors such as legal or poltical intimidation preventing any relook. The members were unprotected, fleeced and alone.  Those charged with protecting members’ best interests feigned impotence, or would assert, It’s just up to the members.

The Regulators’ Double Speak

But on July 3rd an article appeared in the Houston Business Journal:  TDECU delays rebrand as it closes Space City Credit Union merger, terminates bank acquisition 

The article’s main points are that the Sabine Bank acquisition is off, the Space City merger is done, and that the rebrand using Space City is on hold.

The most interesting line however is the reporter’s final comment when reacting  to this post on the Sabine Bank website about the failed purchase which reads in part: 

“On June 4, TDECU and Sabine State Bank and Trust Company (Sabine) announced their mutual decision to not move forward with the planned acquisition and to terminate their agreement . . . to which the reporter added:

The termination was also not disclosed directly by TDECU via a press release or to the HBJ until July 2.

This is the example of regulatory double speak. This “definitive acquisition agreement” of Sabine needed only regulatory approval.  This means NCUA and the Texas Commission would make the decision because  this is where the oversight of the outcome would reside.

The deal got stopped, but was not disclosed by TDECU until July 2,  Sabine’s post is dated June 4.  Why?

The obvious answer is so the Space City merger can proceed unimpeded.  The  credit union regulators refused approval of the bank acquisition because they didn’t believe TDECU was up to the task.  But go ahead and take over these 12,000 members and their future for this is an event too minor to concern us.

The TDECU regulatory hold up did not begin on June 4.  The potential problems with this purchase and TDECU’s declining performance were obvious for at least six months from call reports. But proceed with the credit union takeover.

This regulatory double speak, two TDECU transaction and two opposite outcomes, is the most concerning aspect of regulatory oversight. The Texas Commission and NCUA did not respond to the deeply concerned members who spoke out only after they first learned how disgusting  this deal would be.   They were “nobodies.”

Besides the regulators already told the credit unions it was OK.  They couldn’t  go back now and change their decisions made in private because of members’ concerns.

By all the standards most members care about, the Space City merger heist was abundantly clear.  The regulators ignored their own words such as the members’ best interest and fiduciary responsibility. The members are sheep left to the care of wolves.  In this case both state and federal regulators aided and abetted their exploitation.

The Sabine Bank purchase was stopped by credit union regulators while they stood still during the acquisition of Space City at the very same time. TDECU’s capabilities were fine for credit union members but not a bank’s customers.  TDECU is now backing away from even converting to the Space City brand—a selling point in the merger.

Today we live in a political debate  where regulatory oversight is presented as one of two extremes:  laissez-faire, that is let the market decide or, regulation protecting those powerless against market exploitation.

But there is a third possibility,  worse than these two political extremes.  This is fake regulation deceiving  the public that regulators really are on the job and have rules and processes in place to ensure compliance.  But the regulators do not enforce their own rules.

The credit union market sees this regulatory GAP clearly and the zealous and ambitions are rushing to take advantage.  The result will be that the credit union members may lose their cooperative system because of regulatory neglect.

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July 4th, 2025: The Act of Freedom

Freedom is not a state; it is an act. It is not some enchanted garden perched high on a distant plateau where we can finally sit down and rest. Freedom is the continuous action we all must take, and each generation must do its part to create an even more fair, more just society. 

—John Lewis, Across That Bridge

Honoring Those Who Took Action

Citizens marching in Bunker Hill, Massachusetts on Independence Day 2025

Remembering the  Minute Men’s Call to Action

The 4th of July, 2025 Kyiv Ukraine

People take shelter overnight in an underground metro station during Russian missile strikes. 

An American Who Answered Freedom’s call in Ukraine

A portrait of fallen U.S. volunteer fighters and flags among Ukrainian ones at a makeshift memorial to Ukrainian servicemen and international volunteers killed in action on Independence Square in central Kyiv on July 2, 2025.

From the Kyiv Independent July 3, 2025: As Russia ramps up missile attacks, US halts promised air defense shipments to Ukraine.  Kremlin welcomes reported pause in US arms shipments to Ukraine, says it brings war’s end closer.  

Celebrating Liberty in Ukraine

The largest prisoner exchange shows the joy of freedom regained.

(https://www.youtube.com/watch?v=64J55YzwI5s)

An Anthem Sung Around the World Honoring Today’s Independence Fighters

On this 4th of July, all freedom loving people will stand at the national anthem for one country.  Its people are on the front lines defending the right of all persons to determine their political destiny.

Listen as this anthem is sung from the New York Island to the Baltic Sea by the largest choir in the world.

(https://www.youtube.com/watch?v=mUfwy3f3R4s)

(https://www.youtube.com/watch?v=4INYnx5e5JI)