The 2010 merger of NuUnion Credit Union with Detroit Edison Credit Union was nearly a match made in heaven. The two Michigan-based organizations had similar asset bases of approximately $850 million for NuUnion and $750 million for Edison, side-by-side geographic footprints, and a shared drive to develop greater efficiencies for the benefit of members.

As things stood in 2009, both institutions could have successfully continued as they were and neither was actively looking for a merger partner. But a casual conversation between Detroit Edison’s CEO, Bill Thiess, and NuUnion’s executive vice president, Jim Costello, during a meeting of a credit union board on which they both served changed the trajectories of the two institutions forever.

The result of that talk was the April 2010 merger that created Lake Trust Credit Union ($1.6B, Lansing, MI), a powerhouse that at year-end 2014 served more than 160,000 members, employed nearly 400 people, and operated 20 central Michigan branches, according to data from Callahan & Associates.

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The merger was a huge project according to former NuUnion CEO Steve Winninger far more complex than the typical big-fish-eating-little-fish union of unequals.

If you’re the big credit union and I’m the small credit union, there isn’t much to negotiate, he says. Bill and I both could have avoided this whole thing and glided through our last years of employment with far less stress and effort, but we chose to do it because we thought it was better for the members.

Lake Trust opened for business with Winninger as CEO, Thiess as president, a management team culled from both institutions, and a board initially composed of both prior credit unions’ full boards.

On the one hand, Winninger, Thiess, and their boards set out to design an organization without legacy baggage and without assumptions about what would work and what would not. On the other hand, they knew a major benefit of a merger comes from integration and, as much as possible, they wanted to meld the management teams of their prior credit unions without the natural bias each had toward the people they’d worked with for so many years.

We had a long list of what we had two of and needed only one of, Winninger says.

To rectify this, the credit union brought in an independent organizational consultant Mitchell, Stankovic, and Associates to help Winninger and Thiess decide who would remain on the Lake Trust management team and in what role. The process started with an analysis of the larger credit union’s projected organizational needs. Once it had an organization plan and defined roles, the two leaders conducted interviews to determine who were the best individuals for each spot.

We automatically interviewed everybody currently working, Winninger says. In other words, both HR people got interviews; both had an equal shot.

That wasn’t the case with the board of directors.

And Then There Were 11

There are three things that kill every merger, Winninger says. When they can’t agree on who’s going to be CEO, when they can’t agree on what the organization name is going to be, and when they can’t agree on who’s going to be on the board.

CU QUICK FACTS

LAKE TRUST Credit Union
data as of 12.31.14

• HQ: Lansing, MI
• ASSETS: $1.6B
• MEMBERS: 167,729
• BRANCHES: 20
• 12-MO SHARE GROWTH: -0.21%
• 12-MO LOAN GROWTH: 6.46%
• ROA: 0.56%

Thiess suggested combining the two nine-person boards into one rather unwieldy board of 18 and letting the members determine a practical size. The board subsequently settled on 11 and through attrition reached that number in less than five years.

The board members also decided in the early years they wanted to balance representation from both prior organizations, Winninger says. Then after three or four years, they would be thinking of themselves as one organization and that balance wouldn’t be important. It worked.

The amicable relationship between the two boards began during the early phases of the merger process, when all parties had to work together to determine the governance of the new organization. In those early days and throughout the due-diligence period, an eight-person committee consisting of the two CEOs and three board members from each credit union reviewed all existing policies page by page and determined how to scale them up to the new organization. Then after each committee meeting, the representatives reviewed the recommendations with their respective boards.

The Big Decisions

The group wanted both boards to strike an agreement before the merger date on Lake Trust’s final set of governing policies. And before business opened on Lake Trust’s first day, the board passed a motion via telephone meeting to rescind all former governance policies and to adopt the new set that both boards had already accepted.

At the beginning of business, Bill and I knew exactly what roles we played and what roles the board played, Winninger says. There was tremendous role clarity. We had clear targets, outcomes for what the credit union should achieve for the benefit of the members, and clear boundaries so we knew what decisions we could make and what decisions the board members reserved unto themselves. If we were constantly going back to the board and asking if we could make this or that decision, the integration process would have gone much slower.

Moreover, everybody else knew their roles, too.

Built into that was a monitoring system where the board would track our progress against those targets and boundaries.

There was tremendous role clarity If we were constantly going back to the board and asking if we could make this or that decision, the integration process would have gone much slower.

Two years after the formation of Lake Trust, both Winninger and Thiess retired.

We knew if one stayed on longer than the other, then there would be a tendency for the organization to become either a bigger A or a bigger B, Winninger says. If I had stayed on after Bill, Lake Trust would have become more like NuUnion. If Bill had stayed on, it would have become more like Edison. We felt it was fair to everyone if we did not do that.

After the two men retired at essentially the same time, David A. Snodgrass moved into the role of president and CEO of Lake Trust Credit Union.

As for what he would have done differently, Winninger says the relevant question is more so what does he wish he could have avoided.

Our accountant said if we hadn’t realized the benefits of this merger in the first couple of years, we missed the big decisions, he says. We were determined not to miss the big decisions.

Among those decisions: releasing a number of senior managers who had 20 years of service.

We just didn’t have a place for them, Winninger says. Those were tough decisions. When it’s your money you can do anything you want. But we were working with members’ money, and we didn’t have the luxury of making decisions that are comfortable and easy.