5 Best Practices For A Credit Union Merger

Combining three institutions within three years has given Directions Credit Union a veteran’s perspective on mergers.


In the past five years, 1,320 mergers have taken place within the credit union industry. Some credit unions seek a merger when they are struggling financially. Other credit unions want to seize an opportunity to expand their products, services, footprint, or membership. Directions Credit Union ($589.4M; Toledo, OH) sees mergers as one way to fulfill its mission to be a “trusted partner in helping members achieve their financial goals.” The strategy is working for the cooperative, which at $589.4 million in assets is the fifth-largest credit union in Ohio.

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Directions Credit Union was chartered in 1953 by a group of parishioners and their pastor as St. Clement Credit Union. After expanding its membership to include more than a dozen local parishes and select employee groups and undergoing seven mergers, the credit union changed its name to Toledo Area Catholic Credit Union (TACCU) in 1989. In 2000, the credit union — which by that time was serving 32 parishes and 46 SEGs — converted to a community charter and became Toledo Area Community Credit Union.

A lot changed for TACCU in the following decade. In 2001, it merged with Holy Rosary Cathedral Credit Union. In 2005, it merged with Empire Affiliates Credit Union. In 2007, TACCU merged with Knox County Credit Union. And in 2008, TACCU merged with Erie Shores Credit Union. Also that year, TACCU rebranded as Directions Credit Union.

“We weren’t actively looking,” says Julie Linch, senior vice president of retail delivery at Directions, about the credit union’s merger volume. “[The opportunity] just became available.”

For example, a shared data processing CUSO brought together TACCU and Empire Affiliates (EACU) to initiate that merger. EACU’s CEO wanted to retire but had no successor, so the organizations’ two boards considered a merger. Although both credit unions had $100 million to $200 million in assets and shared the same data processing practices, they also had many differences.

TACCU, a faith-based community institution, had an average account balance of $8,100 per member. It served 19,000 members and its board was composed of mostly white-collar professionals that changed regularly. EACU, on the other hand, was an industry-based credit union that had an average balance per member of $2,800. It served 45,000 members and its board was composed of blue-collar workers that tended to stay on the board, many for 25 years or more.


Source: 2012 CUNA Excellence in Operations, Sales & Service Awards: Official Entry Form

It turns out, those differences created opportunities for the merged institution.

“We complemented each other,” Linch says. “It may have looked difficult from the outside, but there were a lot of reasons to bring the two groups together.”

EACU’s larger footprint and membership was a source of instant growth for TACCU, and TACCU’s mortgage lending and credit card services quickly benefitted EACU members.

The credit unions combined accounts and restructured services to offer the benefits of both former credit unions. The merged credit union introduced a new fee schedule and compromised on a $25 minimum account balance.

“Our first thought was from a member’s perspective,” Linch says. “We tried to take the products, services, and fee structure that most benefitted the member.”

Because of the 120-mile distance between the two credit unions, the newly formed institution kept both names, with EACU adding “a division of Toledo Area Community Credit Union” to its name.

Erie Shores Credit Union, which had six branches in the Toledo area, presented itself as a potential merger in 2007. Erie had similar polices and fees as well as a similar board structure. However, it had a different core system, and its account numbers, branch locations, personnel, equipment, and top management overlapped with TACCU’s.  

Despite the obstacles, the credit unions merged in 2008 and created Directions Credit Union.

In 2003, the combined assets of TACCU, EACU, and Erie Shores totaled $423 million. In first quarter 2013, Directions reported $598.4 million in assets, meaning the combined organizations have a compound annual growth rate of 3.93%.

Although the mergers were a success for all parties, the process was not without its share of hardships. Directions came out of the Erie Shores merger as the great recession was setting in. The new organization had to cut costs in all areas. It initiated salary and hiring freezes and closed four underperforming branches.

“This is a work-in-progress,” Linch says. “We’re a stronger credit union because of these mergers, our members are better off because of these mergers. But internally, it was a long process to get to this point.

It has been five years since the Eerie Shores merger. Direction’s leadership has had time to evaluate best practices and lessons learned from its merger activity over the past 10 years, which include:

  1. Look at credit unions different enough to complement your current product offering.
  2. There is a large expense load in the beginning of the process. “If your selling point to the board is the savings and economy of scale of a larger organization, know that those savings do not come early on,” Linch says.
  3. Begin with solid due diligence. Have an outside firm review the financials of other credit unions.
  4. Be prepared to make staff changes after a year. No matter what titles worked in the old organization, you will not know strengths of the staff members until they work together side-by-side. “We started with the work charts of both organizations and tried to combine them to keep the management teams in both,” Linch says. “But we found out after about a year together you need some restructuring. A person in charge of one area at one credit union shouldn’t necessarily be in charge of that in the larger credit union.”
  5. Taking the best of each organization is subjective. Try instead to compromise and combine processes, products, policies, and procedures.



July 22, 2013


  • We have completed about dozen mergers. We have found that the sooner you integrate the two credit unions the sooner you will realize the benefits of merger. That means operating under one data processing system, one set of services, one culture, and one name. We are honest with the employees and map all of the employees to either a new job in the merged credit union or we help them find a new job. Everyone knows their future employment status. We usually offer jobs to all of the front line staff. Members appreciate having the staff they know continue to serve them. The back office staff is usually where you have to consolidate. But if you give outsourced assistance and generous severance, you will find that the merger will go well. We pay a bonus to employees who stay through the merger and data conversion so that there is less turnover even among those who won't have a job after the merger. The big advantage to a merger is that you have more to offer members. More services, more branches and better prices. We on-board merged members just like other new members and make sure they know about new branch locations, new ATM locations, and that they realize the benefits of the merger. That assures a high retention of merged members. We find that most merged members take advantage of more convenient branches and add new services that were not available before merger. The busienss grows because these members increase their credit union relationship. You should have a written due diligence check list. You essentially ahve to do a complete audit of the merger partner. You have to know that they have good compliance. For example, we often find that escheat policies have not been followed and so we know we have to clean that up. Likewise we find record retention to be weak. You are responsible for cleaning up all the things that have been neglected. We always schedule time in the merger plan to clean up problems.
    Henry Wirz