BLOOMINGTON, Ill. — Merging two credit unions can be difficult enough. So why would a credit union want to merge 12 into one?
State Farm FCU accepted that challenge back in 2006 to trim already lean operating expense ratios estimated at just over 1% for each of its 12 CUs across the country. Each State Farm credit union was separately chartered with its own board of directors and CEO.
The move has lowered SFFCU's expense-to-average-asset ratio to .70%, said Thomas DeWitt, the continuing CEO who headed the largest State Farm CU of the 12. "We have become even more efficient. And we are continuing to find ways to improve."
The improvements, DeWitt said, will lead to increased member service by eliminating many redundant operations and tasks to free up staff to spend more time with members. It also saves money. "One of the first things we did was move to combine all of our databases," DeWitt said. "That took about two years. We were all on the same type of core system — UltraData — which helped make the move less costly and simpler."
But something that was not as simple was addressing all of the disparate polices among each credit union, DeWitt explained. "One of the biggest challenges was getting a uniform set of polices. Among all 12 credit unions we had to come to consensus on what we thought were the right ones for the new enterprise."
The new credit union did that by looking at "every" policy — from lending to savings to back office operations. A team made up of representatives from each credit union managed the decision process, and no CU's policies carried greater weight than another, DeWitt explained.
On top of that challenge, SFFCU had to place all of the separate business processes under a microscope. A complete process improvement study was conducted for six-months, DeWitt said. "We looked at all processes that each credit union had and dedicated a team to doing the analysis."
From the work of that committee, the credit union was able to centralize many of its operations — such as wire transfer, ACH, and mail services — to various locations across the country. Each of the formerly separately charted CUs has become a branch within the new entity, and the CEOs have become managers of their locations.
Reducing the number of employees was never a focus of the now 135,000-member CU, DeWitt said. With staff of 140, SFFCU's employee-to-member-ratio is 964-1. The CEO explained that by combining operations the credit union is now able to more easily grow and add services with the staff it has.
SSFCU did eliminate the separate boards in favor of creating one large board of 15 directors, made up of at least one director from each of the 12 credit unions. "That process went smoothly," DeWitt said. "Everyone understood what needed to be done."
The CU consolidation created a $3.4-billion credit union that has grown assets since the merger by $650 million. It's capital ratio stood at 9.6% after writing down the corporate assessment earlier this year. "We are very conservative, and we are strong as a result," DeWitt said. "We watch our expenses and have simplified offerings - basically just regular shares and loans."
SFFCU also benefits from an excellent relationship with sponsor State Farm. "All of our branches are located within their offices and we often leverage their expertise," DeWitt said. "For example, their corporate investment department is doing our portfolio management. They operate based upon board approved policy and guidelines."
