GLENVIL, Neb.–After struggling with poor financial performance and a limited rural market, Glenvil Cooperative CU has taken an unusual move and agreed to be acquired by First York Bankcorp, a holding company of Cornerstone Bank.
With $3 million in assets and fewer than 300 members, Glenvil Cooperative is the smallest FI in the state, and board chairman Steve Hinrichs told Credit Union Journal that many at the credit union have long thought that a merger or acquisition was necessary.
“We’ve been losing ground over the years,” said Hinrichs. “It’s real difficult for us to be able to pay enough to keep a manager in here that’s qualified; otherwise they get trained and move on to bigger and better things and more money, and you can’t blame them for that.”
Moreover, he said, Glenvil Cooperative has been hamstrung by its limited lending capacity. It has reported small losses for the past few years and listed a net worth of 5.4% in its most recent Call Report.
The purchase must still be approved by regulators, but Hinrichs said he expects everything to be finalized by the end of 2012. The transaction is a liquidation, and Cornerstone will assume all of Glenvil’s assets and liabilities. The bank is not paying a premium for the CU’s capital and book of business, and no capital is being paid out to members beyond refunding their $5 membership fee.
“We have some loans that are delinquent and others that are a little shaky,” said Hinrichs. “There’s a certain amount of risk involved with that, so the capital is pretty much a wash.”
According to its most recent Call Report, GCCU has 110 loans totaling $1.7 million. Four delinquencies are listed totaling $112,000, and 11 other loans–not yet ready to be classified as reportable–are also delinquent, for an additional $167,000.
Chair Fills In For Absent CEO
Glenvil’s last manager left in September 2011, and Hinrichs has served as acting CEO since then. He said it has sought out CUs as merger partners, including Hastings FCU and Archer Cooperative CU. Nebraska’s Department of Banking &
Finance approved a merger with Hastings Federal, but it was held up by an NCUA requirement that HFCU assume all of Glenvil’s mortgage liabilities. Glenvil abandoned the merger after five months. HFCU also does not offer mortgage lending or ag loans, which Hinrichs said are vital for a rural area such as Glenvil.
“We started thinking about whether it was possible to merge with a bank, because basically our main objective was to keep some sort of financial institution here in town,” said Hinrichs.
Keeping A Bank In Town
Patricia Herstein, general counsel for the Nebraska regulator, said the state has a law that allows for cross-industry mergers, and that law does not require that members approve the acquisition. Hinrichs said GCCU sent out an informal ballot explaining the situation and 102 of the 108 responses were in favor of the merger.
“Over the years it’s kind of lost any advantage it once had being a CU, because we weren’t really able to provide the services we could have, had it been a bank or a larger institution,” said Hinrichs. “Most of the larger farmers have gone to other banks anyway just because they had to.”