Texas Credit Unions Merge After Members Approve

The $62.8 million Texas Federal Credit Union of Dallas said Thursday it intends to merge with the $1.6 billion Texas Trust Credit Union in Arlington, according to a prepared statement released by the Lone Star State cooperatives.

TFCU members voted in favor of the merger during a special virtual meeting held earlier this week. Texas Trust, which declined to release the total number of votes cast, said 92% of TFCU members voted for the merger.

The three TFCU branches will remain open post merger, increasing Texas Trust’s branches from 19 to 22. Chartered in 1947, TFCU’s 17 employees serve more than 6,000 members.

Texas Trust will make every effort to retain TFCU employee, according to a special notice that was distributed to members before the merger vote as required by NCUA regulations.

In recognition of the long tenure of TFCU employees, all of whom have been employed for more than five years, a severance will be offered commensurate with their (job) level and tenure. All employees will also receive a retention bonus of one-month’s salary if they remain with the credit union through the effective date of the merger. Additionally, all TFCU employees who stay at Texas Trust will be protected from termination, except for cause, for one year after the merger date, the special member notice document said.

In Thursday’s prepared statement, Texas Trust said TFCU employees will have access to a more robust benefits package and new career opportunities within Texas Trust.

TFCU President/CEO Cathy Perry, who has served the credit union for more than 30 years, is currently under contract that requires certain payments at termination or the effective date of the merger.

“To recognize her significant contribution and tenure, an additional severance payment of $100,000 will be paid at the merger date,” the special member notice document said.

What’s more, Perry will receive a contract payout of $400,000, a $200,002 lump sum payment for lifetime medical per her contract and a $12,509 retention bonus, according to the special member notice documents.

Sandy Smith, who is listed on the special member notice document as TFCU’s former CEO/compliance officer and served the credit union for 36 years, will receive a contract payout of $228,000 and a $200,022 lump sum for lifetime medical per her contract.

With 36 years of service, Mary Minard, TFCU’s SVP of loan administration, will receive a severance bonus of $219,000 and a retention bonus of $6,083; Jose Garza, TFCU’s accounting manager with 24 years of service, will receive a severance bonus of $135,000 and retention bonus of $3,750; and Robin Gilbert, the credit union’s human resources manager with 23 years of service, will receive a severance bonus of $97,750 and a retention bonus of $4,250.

In explaining the benefits of the merger in the special member notice document, TFCU said because of challenges brought on by the economic downturn followed by the COVID-19 pandemic, it has been extremely difficult to maintain earnings sufficient to support operations and growth.

“This has resulted in elimination of member dividends and marketing, as well as a significant cut back in operating expenses including employee raises,” according to the special member notice document. “The merger with TXTCU will bring about increased scale, which will afford our members dividends, added convenience, and access to products and services we were unable to offer. Employees will also benefit by experiencing competitive wages along with enhanced benefits.”

Like many small credit unions, TFCU has experienced growth challenges.

From 2016 to the end of this year’s second quarter, TFCU’s total loans have declined from $32.9 million to $22.4 million, according to NCUA performance reports. The Texas credit union also has seen membership declines ranging from 2% to more than 5% annually, according to NCUA performance reports.

“The directors of both credit unions have concluded that the proposed merger is desirable and in the best interests of members for a number of reasons, such as better pricing and services, additional products, enhanced convenience and account access, continued employee representation and lower operating costs,” according to the special member notice document.

Perry added in Thursday’s prepared statement that more than half of the credit union’s members live in DeSoto, Grand Prairie, Cedar Hill, Mansfield, Arlington and other areas that Texas Trust already serves.

“By joining Texas Trust, our members will now be part of a credit union that can give them financial products and services for every stage of life along with the convenience of locations near where they live and play,” she said.

The consolidation has been approved by the NCUA and the Texas Credit Union Department, according to Thursday’s prepared statement. The legal merger is expected to be completed by the end of the year and the member conversion is scheduled to be completed by the first quarter of 2022.