Was it love at first sight, destined to last for all eternity? A thoughtful courtship by partners that complement one another and have similar future goals? Or a tormented affair that was broken off before it was cemented? I’m talking, of course, about credit union mergers. While it’s true that one credit union cannot divorce the other, there are some mergers that appear to be perfect unions. Combined, that one institution successfully supports multiple headquarters, staffs, and product sets.
Mergers can be opportunistic when two institutions decide they would be greater as one. Or mergers can be solely for legal purposes. For example, several credit union groups, including Affinity Group and Self-Help Federal Credit Union, operate structurally as a single entity for compliance and reporting processes, yet the individual institutions within these models maintain separate credit union branding.
A credit union undergoes a merger to improve its standing and, more importantly, its members’ standings. Without improved member value, there is little that is sustainable or beneficial about a merger. Given this sentiment, is it possible to objectively measure the success of a merger or classify the intent of the partners?
After several years of declining merger rates, 2.5% of credit unions were merged into other institutions in 2011. With the financial turmoil of 2007 – 2010, many mergers that may have been executed voluntarily were put on hold or not explored. Executives focused on internal operations to manage expenses, balance sheets, and member needs.
With the crisis abated and promising economic data, credit union merger activity picked up in the second half of 2011. While the overall rate of mergers for the year was unchanged, charter cancellations in the second half of the year totaled 98, up from the 79 cancellations during the same period of 2010. Assets of merged institutions increased over 2010 levels to $4.87 billion from $4.04 billion. However, one merger, the First Tech/Addison Avenue combination, represented nearly 50% of the total.