The group opposing the merger of the $1.088-billion Vermont State Employees Credit Union—including its former CEO–with $1.94-billion New England FCU remains committed to blocking the deal, and their position has not changed following VSECU’s recent annual meeting, which one person called “member unfriendly.”
That former VSECU CEO, Steven Post, who is leading the effort to convince members to vote no on the combination later this year, told CUToday.info the annual meeting at the close of March only strengthened the group’s position.
“It was probably the most member unfriendly annual meeting I’ve ever been to,” said Post, who watched the virtual event with 150 other members. “The board chair announced at the beginning they would only entertain 30 minutes of discussion on the merger—the most consequential decision of the institution’s life. And, they proceeded have a lot of technology challenges for people to overcome in order to participate.”
But VSECU CEO Rob Miller told CUToday.info the meeting’s merger discussions, and the deal itself, have not been rushed, and that the two-hour annual meeting dedicated appropriate time to merger conversations, including questions from members.
‘Calling All Members’
Text on the website seeks to make VSECU members aware of how mergers work in credit unions.
“Has the merger already happened?,” reads one headline. “NO! The merger has not taken place,” the text on the website continues. “Yes, the email that was sent to members with its subject line ‘We are merging with New England Federal Credit Union’ was designed to make members think the merger was sure to happen. Many members believe that the proposed merger has already been approved with just a vote of the Board of Directors.
“Members must vote, too!” reads another headline. “You would have had to read ¾ of the way through the notice before learning that the proposed merger requires the approval of VSECU members, not just the Directors,” the text continues.
Group Takes to the Media
In a joint letter published on VTDigger.com, Post, former board chair M. Jerome Diamond, and former board chair Kimberly B. Cheney, wrote that even as this year VSECU celebrates its 75th anniversary this year, its current CEO and board have decided to “merge VSECU out of existence.”
In addition to what the group has stated and posted online against the merger, Post, during an interview with CUToday.info, alleged that VSECU’s leaders—Miller and attending board members—said little during the annual meeting that expanded on the credit union’s original reasons for going through with the merger, which Post asserts really just comes down to “bigger is better.”
“During the meeting they still put forth their basic advertising that bigger is better and that members would experience a better credit union than they have today,” said Post. “But if you look at everything around what the credit union has today, and how they feel about themselves, it’s a pretty good and extraordinary credit union.”
According to its call report, VSECU reported net income of $13.1 million and capital of 8.96% at year-end 2021. New England FCU is based in Willison, Vt. and reported $28.1 million in net income, with capital of 11.9%. The CUs are the two largest in the Green Mountain State and combined would have approximately 167,000 members.
Post estimated 30 minutes were dedicated to merger discussions during the annual meeting and that 15 questions were asked, some of which Post alleged were “softballs,” questions he believes the credit union asked members to read.
Concern Over Speed of Deal
What is also concerning the group opposing the merger is how quickly the deal has been assembled.
Post said he learned that discussions about the merger between the two organizations started in October of last year.
“So, in a matter of months they went from initial discussion to final agreement. And, they are moving toward a member vote, apparently, without hiring any independent third-party consultant or advisor to work directly with the board.”
In short, Post alleged the merger has happened “very fast, behind closed doors and without any other input than from the CEO (Miller), as far as we can tell.”
Post said the annual meeting only reinforced his group’s thinking that the merger should not be allowed to happen.
“We (former leadership team and board of directors) worked very hard to build a strong Vermont credit union designed for Vermonters,” said Post, alleging the deal moves the credit union away from its original mission. “This credit union was custom-made for our field of membership. Plus, we already had the scale to compete. We might not have had the scale to compete with Chase, but this combination does not bring that kind of scale.”
Post reiterated that VSECU is strong and that no merger is needed.
“We’re a strong, healthy credit union in this marketplace and are perfectly capable of continuing on our own,” said Post. “If the current leadership doesn’t want to do that, well, I don’t know who’s gaining from this.”
‘Best Interests of Members’
In speaking with CUToday.info, Miller emphasized members will benefit from the comination.
“This merger is in the best interests of our members and it’s an investment in the state of Vermont and its residents,” Miller said. “It will provide our current members with tremendous benefits, and they will have access to more products and services. They will have access to eight new branch locations without us having to build them. We’re going to have better loan and deposit rates, because we will choose the best between both of our organizations. Members will save money on fees.”
Miller said that greater size will be a benefit, as well.
“In the long run pulling our resources together allows us greater financial strength and resiliency,” he said. “When you bring two large balance sheets together you’re going to achieve scale and you’ll also gain greater diversity in the balance sheets that strengthens the credit union.”
Plenty of Time Allowed
Miller challenged Post’s allegation that the merger has been rushed and the deal has not fully discussed and vetted.
“We did start in October with our initial discussions, but our board has been engaged in strategic discussions all last year and actually culminated with a retreat in September. So, they’re well aware of the strategic considerations,” Miller explained. “They were having strategic discussions as to what direction we were going.”
Regarding allegations the merger decision was made by a very small group of people, Miller said, “Our board is elected by the membership to make decisions based on the best interest of our members. They consulted with me. They consulted with our management team. They consulted with an independent consultant. They did their due diligence.”
When asked by CUToday.info to provide the name of the consulting group VSECU used, Miller responded, “We have and will continue to engage a number of consultants and industry experts through the process. We meet and consult with those experts frequently.”
No Financial Incentives
Miller, who will continue on as president/COO with the new credit union—the name of which has yet to be determined—said a salary increase for his role has not been addressed.
New England FCU CEO John Dwyer will be CEO of the new organization if it is completed.
“I have no guarantees…My salary is going be managed as it is today, on a market-rated basis based on comps and other things,” Miller said. “There’s no promise or agreement for my salary to go up or down.”
Miller stressed there are no benefits to himself or the VSECU executive team from the deal.
“There will be no merger-related financial arrangements. If there were we would have to disclose them in our application to NCUA. And I can tell you there will not be, and that’s not what this is about,” said Miller. “This merger is about providing greater value and greater services to our members, to our employees and to all Vermonters.”
Miller said there will be no merger-related distribution of excess net worth to members, “since this is a merger of equals.”
Positive Feedback from Members
Miller said members have been receptive to the merger based on interactions he and the credit union have had with them, and that during the annual meeting questions were asked and an appropriate amount of time was dedicated to merger discussions.
“The meeting lasted for nearly two hours. We allocated 30 minutes for questions specific to the merger,” explained Miller.
Miller said members who had questions that time did not allow to be addressed were told they could send them to the credit union and they will be answered on the CU’s website at a later date.
“This was our annual meeting, not a meeting that was held for the purpose of debating or discussing the merger,” added Miller. “But, given the timing of the announcement of the merger, we wanted to make time for that.”
‘Independence is Better’
The group’s website (www.callingallmembers.org) not only strongly opposes the merger but also addresses current VSECU leadership.
“We believe independence is better than a merger – much better,” the website states. “VSECU is perfectly capable of being present for at least another 75 years, and it should be. The problem we have, and it’s a big one, is that VSECU does not have the leadership needed to assure it is a prominent provider of cooperative financial services in Vermont, for Vermonters. In fact, as confirmed by this merger proposal, our credit union does not have the leadership that will choose to keep VSECU in existence at all. How can this be?”
“As members, we have a lot of work to do to preserve the vision of VSECU as a credit union for Vermont and all Vermonters. We are here to coordinate the work it will take to defeat this merger and over time to put dedicated leadership in place at our credit union,” text on the website continues. “We are calling on all members to make change simply by voting. Join us in the effort to preserve VSECU; first by defeating this merger proposal and then by helping to elect and hire new leadership.”
Miller said those allegations made on the site are unfounded.
“I’m very proud of the performance of this organization in the time that I’ve been here,” Miller said. “But it’s not just me, it’s all the people. So, when you call for a change in leadership because you don’t think the credit union is headed in the right direction, it’s not just me that you’re pointing fingers at. It’s everyone who works here. It’s just wrong. I will hold our performance up against anyone else. We have done well financially. We have done well in the community. In fact, some of the information (the group opposing the merger) put on their website acknowledges VSECU is a vital part of our community and it shouldn’t go away. Well, it can’t be both. We can’t be a real really vital part of our community and also have poor leadership and management at the same time.”
Miller said VSECU will be communicating with members before the vote, which is expected to take place in the Fall.
“We want to make sure they are as informed as they can be and we’re confident they’re going to see the value in the merger,” he said.
‘Defeating This Merger’
Former CEO Steven Post disagrees.
“We’re getting members more engaged and aware of this merger. I think the more we’re able to do that, the more support will gain and have a better chance of defeating this at this merger when it comes to vote,” Post said.