Remove From Taboo List: Merger Talk
OLYMPIA, Wash.-During planning sessions, it's no longer taboo to discuss the possibility of merging into another credit union, according to one veteran of the process.
The economy dictates that credit unions must now openly address all options, including merger, pointed out James This, president of The Paragon Group. "A couple years ago if you brought up the topic of merging out during a strategic planning session, you were in big trouble. But with all of the issues facing credit unions, you hear much more talk of merger on both sides of that topic."
The issue of operating expenses are certainly being raised, said This, who questioned whether credit unions are properly addressing the matter. The initial reaction is to cut expenses, which is not always the right move, This said. "We have to transition from cutting expenses to figuring out how we can be much more efficient in our operations. Cost cutting is a one-time thing. What we have to look at is how do we get long-term efficiencies in our processes."
That includes closely evaluating procedures, but more importantly, assessing products that are not cost effective. This believes, too, that CUs must collaborate more effectively to generate long-term economies of scale.
On the revenue side, planning session must address ramping up lending, including finding ways to become more aggressive with first mortgages without taking on too much risk. This recommended targeting current members who have mortgages elsewhere, and who don't have many years left to pay the loan off. "Refinance those loans at a lower rate to help members pay them off more quickly," This said. "I can't think of a safer mortgage loan."