NCUA Approves Supervisory Merger of a New Jersey Credit Union Into PenFed

Because of its deteriorating financial performance, the $132 million Aspire Federal Credit Union in Clark, N.J., has merged into the $26.7 billion Pentagon Federal Credit Union in McLean, Va.

Though the consolidation took effect on April 1, it was approved as a supervisory merger on Feb. 22 by NCUA Regional Director John Kutchey. The consolidation did not require the NCUA board’s approval, according to an NCUA spokesperson.

The required affirmative membership vote is waived when the NCUA determines the merging credit union is in danger of insolvency and that the proposed consolidation would reduce the risk or avoid a threatened loss to the NCUSIF, the NCUA spokesperson said.

The independent federal agency did not post a news release to announce the supervisory merger. It is the NCUA’s practice not to publicly announce via a news release a merger of any kind. The independent federal agency, however, said it issues a public announcement when a credit union is in the NCUA’s conservatorship or it is liquidated and there is a purchase and assumption.

PenFed President/CEO James Schenck said the merger was approved because of Aspire’s deteriorating financial performance.

“PenFed did not issue any press release regarding the merger, which is our standard practice,” he said.

Aspire President/CEO Thomas J. O’Shea did not respond to a phone request for comment. He has led the credit union since November 2005, according to his LinkedIn page.

At the end of 2020, Aspire posted a $2.2 million loss and a gain of $559,858 in 2019, according to NCUA financial performance reports.

However, the New Jersey credit union recorded losses of $3.4 million in 2018, $6 million in 2017 and $1.6 million in 2016, NCUA financial performance reports showed.

Over the last five years Aspire saw substantial declines in total loans from $139 million in 2016 to $68.6 million in 2020, while loan income plunged from $8.3 million in 2016 to $4.3 million in 2020, NCUA financial performance reports showed.

In 2016, the credit union was managing 22,416 in total loans and half of them, 11,418, were non-federally guaranteed student loans worth $18 million, and 3,108 were used vehicle loans worth $34.8 million. By the end of 2020, total loans declined to 11,305 in total loans, while its student loans fell to 3,886 worth $5.3 million and used vehicle loans declined to 909 worth $10.3 million, according to the credit union’s Call Reports.

NCUA financial performance reports also showed that the credit union’s loans in delinquency have been well above its peer average of 0.63%. At the end of 2020, Aspire posted a delinquency rate of 7.68%; 5.69% in 2019; 4.07% in 2018; 7.13% in 2017 and 5.26% in 2016.

At the end of last year, Aspire recorded $5.2 million in the total amount of delinquent loans and $4.8 million in loans that are in non-accrual status, according to the credit union’s December 2020 Call Report. Aspire also posted charge-offs of $2.5 million and $594,383 in recoveries.

Adding to Aspire’s challenges was its declining membership, which dropped from 25,429 in 2016 to 20,097 in 2020.

Chartered in 1948 as FAA Eastern Region Federal Credit Union, it originally served a small group of employees of the Civil Aeronautics Administration, which is currently the Federal Aviation Administration. Over the years, Aspire expanded to serve a variety of select employee groups throughout the Northeast.