HOLLYWOOD, Fla. - Though regulatory accounting changes will slow the merger train down, a panel of experts on combining credit unions suggested the continued consolidation in the movement is inevitable.
Indeed, the panel at CUNA Mutual’s recent Discovery Conference and made up of three credit union CEOs who have led their respective credit unions through multiple mergers, were essentially offering a crash course in how to merge credit unions successfully.
Even so, while Community Credit Union CEO Sean Rathjen, Great Wisconsin CU CEO Kim Sponem, and Valley First CU CEO Hank Barrett sung the praises of the growth and expense-cutting opportunities of mergers, they acknowledged the dark side of mergers: the ongoing loss of small credit unions that essentially have no choice in the matter.
“Small credit unions are going to have a tough go of it,” Barrett observed. “Unless they have a really specific niche, they’re going to be in real jeopardy. They will be forced into merger, not a like-size merger. It’s more of a survival mode for smaller credit unions.”
And there could be a price to be paid as small credit unions continue to be merged out of existence. “Sometimes the merger discussion becomes small versus large,” Rathjen offered. “If a small credit union wants to make it on their own, we should support them. There is a downside to having fewer credit unions in terms of our political might. We need to do more to help small credit unions survive and thrive.”
It’s not just an issue of politics, he added. Larger credit unions generally have better products and services to offer, but small credit unions offer better service, Rathjen maintained, noting that when his credit union goes into merger talks with smaller CUs, he is very upfront. “We’re going to offer your members better products and services and more convenience than you ever could, but we cannot serve your members the way you did,” he said. “At our size, we cannot possibly know every member by face and name when they walk through the door.”
After the panel concluded its discussion, Credit Union Journal asked Rathjen to explain how the movement should be offering better support to smaller credit unions so they are not forced to merge. “We need to look at better ways to collaborate, things like CUSOs,” he said. “For example, if we could find a way of offering home banking in a cheaper way, like the corporates did for item processing in the 80s. If something like that could be put together, the larger credit unions could invest in it to help subsidize the small credit unions. I would invest in it. We need small credit unions, and they should not be forced to merge.”
Still, all three CEOs generally spoke of mergers–when they are done by consenting CUs who want to merge–in glowing terms. Among the reasons they offered up for merging:
* The CEO at one of the CUs is retiring
* Synergy combinations: where two CUs are trying to serve similar markets and/or are trying to expand into similar markets.
* Merger can be the answer where growth and profitability are an issue.
* Diversification of field of membership
But perhaps the most compelling reason is that size really does matter, according to Sponem, who is in the midst of a “merger of equals” with Summit CU. “We are both strong credit unions with solid balance sheets, but together we will have stronger economies of scale and can bring better value to the members,” she explained. “We are in an overbanked community, we wanted size to compete with the banks. We are both good-sized credit unions, but in the bigger scheme of things, we are small financial institutions.”(c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com http://www.sourcemedia.com
