VICTORVILLE, Calif. — Available financial institution: CU w/loyal membership ISO larger, stronger mate for LTR, mutual benefits.
The available credit union is The Members' Own FCU, a $91-million CU that closed 2008 with a $4-million loss and reported delinquency rate of nearly 10%. In an unusual twist to credit union merger attempts-most of which are treated as state secrets by the two parties until all details can be worked out - The Members' Own FCU publicly announced it is seeking a merger partner. The credit union placed a letter to members on its website and sent a press release to the local newspaper.
Members Own CEO Mary Kassel told Credit Union Journal she felt it was best for the CU to be aboveboard. "We are honest and open with our membership and our local community," she said.
And the reaction from the CU's membership? "The members appreciate us keeping them informed. One member even suggested a possible credit union to merge with - that was an unexpected e-mail!"
The search has "just started," Kassel said, so she did not have any leads as to possible merger partners for Members Own.
The CU informed its members of its desire to identify a merger partner via a letter posted to its website on April 9. The letter said the board of directors felt losses from its construction loan program, combined with an increase in bankruptcies and delinquencies, left the credit union in a vulnerable position financially.
"With assets of just under $100 million, the losses cannot be readily assumed while maintaining a healthy amount of capital," it stated.
The letter went on to say the board's goal is: "to find a larger credit union with which to merge so that our members can continue to have the service they are accustomed to, while allowing for a possible improvement in the interest they earn on savings and the rates they are charged for loans, along with long-term financial security."
The letter blamed the CU's woes on the whiplash of home values in its local area during this decade. It noted housing prices built up rapidly, then fell precipitously, leaving property builders unable to obtain permanent financing.
Kassel said the problem was not necessarily with the construction loans themselves, "it was home values fell so fast, the builders couldn't find financing or the owners couldn't afford to keep the homes. It wasn't bad construction loans; it was bad timing in the real estate market, which no one could foresee."
According to Kassel, Members Own's losses in 2008 were "minimal" however, "we knew what was coming based on the houses we were getting back."
The credit union is having to allow for losses on 16 homes it currently owns, plus there are others it may get back from members who are 30 days to 60 days in default.
"We've allowed for $3 million in loan losses in the first quarter, and we can't keep doing that and survive," she appraised.
"We have a lot to offer to another credit union, such as our membership," Kassel declared. "We have 11,255 members and they are very loyal. They would like our credit union to survive, but they don't want it to go away. They are behind our board 100%."
