Citing 20% Decline in Membership, Inability to Grow, Chabot FCU to Merge Into University CU

LOS ANGELES–With its board citing a 20% decline in membership, members of Chabot Federal Credit Union have voted in favor of merging into Los Angeles-based University Credit Union.

Tuyo

David Tuyo

The $73.3-million Chabot FCU, which has approximately 1,625 members, is scheduled to become part of the $920-million University CU, which has approximately 44,131 members, in the first quarter of 2022.

“This merger is about bringing us together and finding pathways to better serve all of our members as well as the higher education communities we serve,” said David Tuyo, CEO of UCU. “Greater participation in the financial cooperative allows us to increase the amount we are able to give back and invest in these communities. The support that we provide to university and college communities via our members is primary above all else and this partnership is another step towards greater levels of success for all University community stakeholders.”

University CU said Chabot FCU’s office and staff in Dublin, Calif., will be retained.

At Sept. 30, University FCU reported net income of $1.86 million and net worth of 7.7%. Chabot FCU reported negative net income of $54,621, with capital of 14.75%.

Aging Membership, Other Issues

In its NCUA-mandated disclosure to members, Chabot FCU said that since 2016 it has “witnessed a 20% decline in membership, due primarily to an aging membership base. During the same time, the credit union's loan to share ratio has averaged around 30% and most recently 33.99%. This ratio serves as a good indication of a credit union's ability to earn sustainable income and grow. With low net income, CFCU is prohibited from hiring more staff, investing in technology, expanding service hours, and growing financial literacy efforts. Despite an intense effort, CFCU has made very little inroads in serving the student body populations.”

While Chabot FCU has capital of 14.75% compared to University CU’s 7.7%, in its disclosure statement it cited “increased capital” as among the reasons for seeking to merge.

No Capital Distribution

The credit union also said it will not distribute a portion of its net worth to members as a result of the merger, saying “the credit unions have determined the shares  in each credit union are substantially equal in value and no share adjustments are warranted.”

The credit union said no additional compensation will be paid to any Chabot FCU management as a result of the merger.

 

 

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