A merger between two large West Coast credit unions is drawing national attention as it continues the industry’s consolidation and raises questions on who benefits from such deals.
SAFE Credit Union, a $4.2 billion institution based in a Sacramento, California, suburb, has agreed to merge with Seattle-based BECU, the nation’s fourth-largest credit union with $29 billion in assets.
Both credit unions are financially sound, with SAFE having about $400 million in reserves. SAFE CEO Faye Nabhani told Sacramento media that the merger would lead to lower fees and help pay for improved technology and new services to better compete against for-profit banks.
Similar reasoning is often cited in banking industry mergers, in which acquiring firms typically pay a premium for shares of the selling institutions. Credit unions are member-owned, not-for-profit entities that do not have stock, but build up reserves through retained earnings.
Some industry experts, including former N.C. State Employees’ Credit Union CEO Jim Blaine, are criticizing the merger as an example of credit union executives not acting in the best interest of their members. Blaine led SECU, the second-largest U.S. credit union, for more than two decades before retiring in 2016.
“Recently the board of directors of SAFE voted on behalf of the 244,000 members of SAFE to drop off the keys to the credit union and give them that $400 million in member reserves to BECU,” Blaine wrote in his blog. He lives in Granville County.
Blaine suggested that SAFE could instead split the $400 million among members, providing a payout topping $1,600 per member. BECU, which started out as a credit union for Boeing employees, would still have an 11% capital ratio that far exceeds regulatory requirements to be considered well-capitalized, he noted. BECU has two offices in North Charleston, South Carolina, near a Boeing factory.
Ed Speed, the retired CEO of a $2 billion Texas-based credit union, wrote about the pending BECU merger in a Credit Union Daily column last week. “Retained earnings do not belong to executives. They do not belong to consultants nor the National Credit Union Administration. They do not belong to acquiring institutions. They belong to the members, past, present, and future, whose deposits, trust, and loyalty built that surplus over decades.”
Asked if the merger will provide a specific financial benefit to SECU members, spokesman Micah Grant said via e-mail, “We fully expect SAFE members to benefit with lower fees and loan rates, higher dividends on savings, and enhanced products and services.”
Mergers of financial institutions often involve bonuses and extended employment contracts for executives of the selling concerns. Asked if the SAFE merger included such provisions, Grant said, “Our standard policy is not to discuss confidential personnel information.”
Speed wrote in his column, “When executives engineer compensation packages triggered by the shutdown of the institution itself, they are converting member capital into personal benefit. The regulator signs off. The consultants write the script. And members watch their inheritance vanish with no vote, no voice, and no real explanation.”
The merger requires approval from federal and state regulators and SAFE members. It is not expected to close until early 2027.
As in the banking industry, the number of credit unions is declining significantly. There were about 4,455 U.S. credit unions at the end of 2024, a 29% decline from a decade earlier. The National Credit Union Administration approved 80 mergers in the first half of this year, following 162 last year.
Four federally chartered credit unions based in North Carolina are roughly the same size in assets as SAFE: Truliant, Coastal, Allegacy and Civic.
David Mildenberg is editor of Business North Carolina. Reach him at dmildenberg@businessnc.com.