Mergers of financial institutions may be as common as sweet tea and breakfast biscuits in North Carolina, but that doesn’t mean the deals’ executions are simple.
The latest example is this summer’s troubled transition involving a trio of Raleigh-based credit unions. The upshot is that the emergent Civic Federal Credit Union is reporting significant financial losses and mounting levels of soured loans. It has lost 10% of its members in a matter of months.
Since opening in 1983, the Local Government Federal Credit Union has been joined at the hip of the State Employees’ Credit Union of North Carolina, or SECU, which grew into a $50 billion institution. Amid pressure from banks, courts ruled SECU couldn’t accept city and county employees as members, so a separate arrangement was developed. Local Government grew into a $4 billion asset institution, ranking fourth-largest among the state’s credit unions.
SECU provided back office support and kept track of members’ account information, in return for an annual fee that has approached $40 million annually in recent years. Under the arrangement, Local Government members could use SECU offices when they need to do some banking…