Do top executives at a small credit union that gets merged out of existence deserve large payouts on their way out the door?
That's the question facing members of Space City Credit Union in Houston after leaders of the member-owned cooperative
Under the terms of the agreement, roughly $5 million would get distributed to Space City's 12,000 or so members. They would receive a minimum of $100 and a maximum of $1,000.
Meanwhile, longtime CEO Craig Rohden, who isn't planning to work at the credit union post-merger, would receive a lump sum of $3.5 million, plus another $500,000 after the expiration of a two-year noncompete agreement. Two other top executives would get a total of $2.75 million.
The $6.75 million in payouts to three executives, which were disclosed to Space City members in late March, have drawn accusations of self-dealing.
"My initial reaction was not 'No,' but, excuse me, 'Hell no,'" said Wende Hester, a Space City member who lives in Lake Jackson, Texas.
Hester told American Banker that she voted against the merger, and that her daughter, who's also a Space City member, planned to do the same. She accused a small number of Space City executives of distributing the majority of the cooperative's equity to themselves.
Rohden, who has been with Space City for more than three decades, did not return a call seeking comment. A spokesperson for Texas Dow Employees Credit Union, the $4.8 billion-asset institution that plans to merge with Space City, also did not respond to a request for comment.
In Space City's March 28 notice to its members, the credit union's board recommended a "Yes" vote on the merger, citing various reasons.
Those rationales include the roughly $5 million dividend to Space City members, the arrival of improved technology, the addition of 35 branches and the fact that after the merger the acquirer plans to rebrand as Space City Financial.
The notice also states that the payments to Rohden are in "honor of his retirement and in recognition and appreciation of his long tenure and outstanding performance." The $3.5 million lump-sum payment represents "the estimated amount of compensation had he remained with Space City until retirement," according to the notice.
The document does not list Rohden's age but credits him with 30 years of "visionary leadership." Rohden attended Texas State University from 1988-1990, according to his LinkedIn profile.
In 2023, the last year for which data was available, Rohden received reportable compensation from Space City totaling $245,630. Between 2009 and 2023, he received a total of around $2.75 million of reportable compensation, or an average of $183,000 per year, according to IRS filings.
Space City reported a net loss of around $30,000 last year and a net loss of roughly $611,000 in 2023, but net income of around $1.48 million in 2022, according to public filings. Between 2009 and 2024, the credit union's net income totaled approximately $5.5 million.
Under the terms of the proposed merger, Nikki Moore-Owens, a senior vice president at Space City, would remain employed and receive a $55,000 annual salary increase.
Moore-Owens would also get a lump-sum payment of $1.9 million, representing $118,750 for each year she's been employed at Space City. And she would receive an additional $350,000 in consideration for what the Space City board called a "two-year non-compete, non-solicit, retention agreement."
Also planning to continue working at the surviving credit union is Paula Newkirk, Space City's vice president of lending and member solutions. She would receive a lump-sum payment of $500,000 and an annual salary increase of roughly $100,000.
Peter Duffy, who advises credit unions on
The National Credit Union Administration's regulations provide for stipulations that must be met in order to receive approval, including making disclosures about compensation arrangements to the credit union's members, Duffy said.
"If members approve the deal with that knowledge, then the NCUA, barring any other issues — and this is key, barring any other issues — will approve the merger as well," Duffy said.
An NCUA spokesman said in an email that he was unable to comment on the specifics of the TDECU-Space City merger.
Claude Hanley, a partner at Capital Performance Group, said that
"It's not uncommon to come across former bank executives and CEOs who are holding senior executive positions in credit unions. It doesn't totally surprise me that that sort of compensation arrangement was granted," Hanley said. "Executives aren't working at credit unions to get rich. It's not like at a community bank where there's stock and expectations for making a very good living."
Chip Filson, a former credit union regulator at both the state and federal levels, was highly critical of the pay arrangements outlined in the notice to Space City's members. He was especially disparaging of the payments for noncompete agreements, saying that Rohden wants to be paid for not working when he's the person who arranged for himself to not be working.
"This is more than extreme," said Filson, who blogs about the credit union industry and has been critical of certain other mergers. "What brings this to the top of the charts is the extraordinary extraction of personal benefit that these three top people have done."
"Why would you pay $11 million in order to close the credit union, in which over half is to the people running it?" Filson said.
Hester, the Space City member who said she voted against the merger, had a similar reaction. "You could stay on and keep getting your $200,000 per year," she commented.
Nathan Place and Chana Schoenberger contributed to this story.
