AUGUSTA, Ga.-When CSRA Credit Union here merged with Atlanta's Associated CU in late 2009, it did not disappear.
Rather, the credit unions agreed CSRA would continue to operate as a brand. Eighteen months later, it is reporting numbers that show the value of having avoided a "slash-and-burn" approach to the merger.
At the time of the merger, projections forecast that CSRA would post positive numbers by the third anniversary of the deal. But those numbers are already ahead of forecast, showing expenses have decreased 21% while lending has increased by 13%.
Part of that expense reduction is not a surprise. While CSRA has retained its name and operates as "A Division of Associated Credit Union," it was able to eliminate many redundant backoffice functions, such as compliance, IT and related support costs, according to Associated CU CEO Lin Hodges. While there were no lay-offs, attrition has helped trim the head count at CSRA to 31 from 51.
At the time the merger was completed, the then $55-million CSRA was serving 12,000 members and had 6% capital. A broader menu of loan offerings since the merger has been the driver behind the 13% improvement. That growth has been especially helpful to Associated CU's bottomline, as ACU has seen lending decrease $30 million (6.5%) over the past year. At March 31, the $1.2-billion Associated CU, which has 155,000 total members, had just over 47,000 outstanding loans and leases, totaling $426 million.
Hodges explained that much of CSRA's increase in lending has come as the result of being able to offer a wider range of products. For example, "We introduced indirect lending into the Augusta market," said Hodges. "We have some support that comes from the main office, but [CSRA] introduced that program into Augusta, and that's a good portion of the increase."
Additionally, Associated has its own mortgage department-though the CU only portfolios loans with a 15-year terms or less-and CSRA has been able to offer those services as well.
Beyond that, Associated (and CSRA) is pushing its Visa credit card and currently has a 15% penetration, said Hodges.
"Our philosophy is that just about everybody has a credit card, and we can identify people that should be qualified to have a credit card," said Hodges. "If they don't have it with us, we put in a program that prompts staff to ask if you would like to consider our credit card, our rate and our reward program. Just asking the question got quite a bit of response-we doubled the number of cards that we're putting out each month."
Members who apply for the card receive either a 12.9% or 9.9% rate, based on credit scores; the card carrying the 9.9% APR also offers a dollar-for-dollar reward program.
A 'Credit Uniony' Offering
Associated and CSRA have also begun offering student loans and a risk-based auto lending program, wherein if the member pays the loan back in a timely fashion, the interest rate decreases by one percentage point with an overall reduction cap of three percentage points available.
"By the time that they're done, that rate is actually as low as the very best credit-worthy customer we have," said Hodges. "I like that, because it feels 'credit uniony'-it feels like something a credit union would do that a bank wouldn't."
For now, that option is only being offered with auto lending, but Hodges said that CU officials may later expand it to other realms.
One of the benefits that Associated reaped from the merger is gaining a presence in Augusta, about two-and-a-half hours away from its base in the greater Atlanta area. Hodges said that the credit union had wanted to be in that market for some time, and this merger allowed it a foothold there without having to introduce itself to the community.
"I don't think this approach is given enough consideration in most mergers," he said. "Most of the time mergers are kind of slash-and-burn and there's a winner and a loser. To me, that's a short-term view. ... What appeals to me in this particular approach is being able to let those people [continue] to do their thing; the members appreciate that, the employees appreciate that, and the community is also a beneficiary. They know their community better than I could ever know their community."
