10:31 AM PDT on Wednesday, September 15, 2010

Special to The Press-Enterprise

USA Federal Credit Union announced Monday it would merge with Navy Federal Credit Union, after the boards of both financial institutions approved the deal. The newly combined credit union will begin operations under the Navy Federal banner by Oct. 1, pending regulatory approval by the National Credit Union Administration.

“We are excited about this merger and know that Navy Federal is an excellent choice for us,” said Mary Cunningham, USA Federal’s chief executive officer, in a statement. “We share the same commitment of service to our members — the men and women in uniform who serve our country and the San Diego community.”

Navy Federal, the world’s largest credit union with more than $41 billion in assets, said all of USA Federal’s 19 branches, including those in Lake Elsinore, Murrieta and Temecula, will become part of its branch network. Navy Federal’s President & CEO Cutler Dawson said all 206 USA Federal employees, including Cunningham, would be invited to join the new company.

Jennifer Sadler, a spokeswoman with Navy Federal, said in a phone interview that Cunningham’s role once the merger is completed “is yet to be determined.”

Members will be notified of the merger and will have access to additional information on Navy Federal and USA Federal websites and in branch offices, he said.

“This is important for us because it strengthens our presence in Southern California and expands our branch access for members — here and overseas,” Dawson said. The combined credit union will have more than 200 branches worldwide, with 22 in Southern California, more than $43 billion in assets and more than 3.5 million members.

Founded in 1953, USA Federal had been the sixth-largest credit union based in San Diego with more than $600 million in assets. But the credit union had been dealing with an increase in delinquencies due to the recession, which had dropped its net worth ratio to 2.76 percent, putting it into the category of “significantly undercapitalized,” according to the credit union administration.

The credit union industry considers 6 percent as adequately capitalized, while fully capitalized is 8 percent and above. As of June 30, Navy Federal reported a net worth ratio of 9.5 percent.

Also, USA Federal members will be joining a more profitable credit union. According to reports filed with the administration, Navy Federal, as of June 30, reported net income of $214 million for the first half of the year, along with $484 million in nonperforming assets, or 1.16 percent of its total assets.


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