GREENBELT, Md. – Educational Systems FCU is assessing members of Montgomery County Teachers FCU an unusual one-time $35 fee to help defray the costs of absorbing the troubled $400 million Rockville, Md., credit union.
The estimated $2 million to be raised by the unprecedented merger fee will help pay the costs of integrating data processing and changing signage, cards and checks, and will also help fill in a capital hole that diminished the net worth of the surviving credit union, according to Chris Conway, president of Educational Systems FCU. “This is to ensure that our members are not significantly negatively impacted by the merger,” he told the Credit Union Journal this afternoon.
The combination of MCT, which had just 4.3% net worth at mid-year— earning it the designation of significantly undercapitalized under NCUA minimum capital rules known as prompt corrective action—and Educational Systems, with 9.7%, will dilute the combined credit union’s net worth to just 7%--attracting close attention from NCUA.
MCT racked up big losses—almost $30 million--from 2008 through 2011, before breaking back into the black for the first six months of 2012.
Conway said the merger fee is being assessed to ensure that members of Educational Systems are not unfairly impacted by the combination. “MCT members are being asked to defray the costs of having their credit union continue to serve members of the educational community,” said Conway, who served as a senior executive at MCT during the 1990s.
The merger fee is being assessed all members of MCT, except students and those under 21.
Educational Systems, based in the Washington, D.C., suburb of Greenbelt, will gain four additional branches in wealthy Montgomery County from the merger, which will create an $800 million credit union with10 branches in six southern Maryland counties.