A No Merger Guarantee and a Revulsion for Mutual Bank Conversions

Making a pledge to members in 1997 that Cascade FCU, Seattle, has no intention of merging with another financial institution Dale Kerslake, CEO, promised to pay members $100 if the CU merged and as a result changed its name, a member's account number or closed a member's primary branch within a five-year period. Six years and counting and there's no payout in sight.

 
 

Making a pledge to members in 1997 that Cascade FCU, Seattle, "has no intention of merging with another financial institution" Dale Kerslake, CEO, promised to pay members $100 if the CU merged and as a result changed its name, a member's account number or closed a member's primary branch within a five-year period. Six years and counting and there's no payout in sight.

Kerslake got the "No Merger Idea" while in the hospital recuperating from a broken leg. "Maybe I had too much time on my hands, but I'd seen way too many banking mergers, and people were complaining." Then, Kerslake was committed to offering a stable alternative to banks, but these days he's fuming about credit unions converting to mutual bank charters.

"Two credit unions in this state have already converted and two more have announced their intention to convert (29 have started the switch, nationally. I'm sick about it and I just don't get it except to conclude that it's about greed, plain old greed," he said. "Here in Washington, we happen to have a very good field-of-membership policy, so it doesn't make sense (except as a management profit motive). You can't convince me that members get benefit from these conversions! Management becomes wealthy, however (through later IPO stock offerings)."

Kerslake feels strongly that if a CU does convert, there should be a proper distribution of capital. "I'm tired of seeing credit unions starting to think like banks. I think these conversions are a real danger, a threat, and we need to stand up to them, and to those that push them." He acknowledged that the Seattle metro area had plenty of CU competition, given the large number of community charters.

Kerslake has even devised a neat way for Cascade ($150 million-in-assets, 11,000 members and 10% capital, www.cascadefcu.org) to benefit from a former CU's philosophical stumbling: by taking in their former select employee groups. "In 1982, when Columbia CU (no longer a CU) got its community charter they started charging employees of Burlington Northern (one of the SEGs that originally started the Columbia) to cash their paychecks, " Kerslake said. "Some of the founding members approached Cascade and asked us to open a branch to serve them and we did. It's one of our most successful branches."

More recently Cascade signed up a much larger SEG, Goodrich Aviation Technical Service's 1300 employees, a part of Goodrich Aerospace, which was formerly served by Western Credit Union. "I'll cherry pick as many of these disenfranchised SEGS as I can," said Kerslake.

 

 

 

Nov. 17, 2003


Comments

 
 
 
  • Commenter #3, CFCU’s loan to deposit ratio is explained by our deposits per member ratio being more than double the industry average. Our loan ratio would be above peer group if our deposits where only average for the industry. CFCU would not consistently be recognized for its financial performance by Callahan’s if it were mismanaged. Commenter#4 and #5. You are being way too cynical. The idea of a no-merger guarantee originated from frustrated members commenting about the hassles they went through when their bank merged. We simply wanted a way to offer assurance they would not be put through the hassle at CFCU. Or, if we did merge, the guarantee is a way of compensating for the inconvenience a merger imposes on its members. CFCU is open to any merger offer that will provide better long term benefit to CFCU members. Unfortunately, an increasing number of credit unions abandon their not-for-profit heritage in favor of the for-profit bank model. Charging $25 for an NSF is a typical for-profit tactic credit unions now use.
    Dale Kerslake
     
     
     
  • Commenter #3, the loan to deposit ratio is explained by a dollars per member deposit ratio double the industry average, and a reluctance to make 30-year fixed mortgages when rates at record lows. Our loan ratio would be above peer group if our deposits where only average for the industry. Commenter#4 and #5. I did not say CFCU would not merge. The no-merger guarantee stemmed from frustrated members commenting about the hassles they went through when their banks merged. The guarantee is a way of recognizing the inconvenience a merger puts its members through. Any merger offer that will provide better longterm benefit to CFCU members will be considered. Credit unions are co-ops that are suppose to return money to the members. Cascade does that better than most, and does not gouge its members with $25 nsf fees, which is now the norm for the industry.
    Dale Kerslake, Cascade FCU
     
     
     
  • Great information and story.
    Anonymous
     
     
     
  • Kerslake's credit union has a 30% loan to deposit ratio; not a business model most would equate with a well run credit union. Is he qualified to critique other business models?
    Anonymous
     
     
     
  • I'd love to see more stories on mutual thrift charter conversions...both pro and con.
    Anonymous
     
     
     
  • I'd like to see a list of CUs converting; would help to research publications re: reasons for conversion; pros & cons; etc.
    Anonymous
     
     
     
  • This anti-merger tactic appears more designed to protect the Manager's future and that of the insiders. A merger may be the best thing for his members. Buying them off with a $100 bribe is the wrong approach. Henry Wirz, President, SAFE Credit Union
    Anonymous
     
     
     
  • Dale Kerslake doesn't care about his members welfare. His anti-merger tactic appears more designed to protect his future and that of the insiders. A merger may be the best thing for his members. Buying them off with a $100 bribe is the wrong approach.
    Anonymous
     
     
     
  • Which CU have started to switch? Do they have a common strength and/or weakness to take the step to change charters?
    Anonymous