The number of credit unions declines every quarter, primarily due to industry consolidation via mergers. There seems to be two different scenarios that act as catalyst for a merger. Often, a smaller credit union is constricted in its ability to offer a full range of services and products to its members, and seeks out a larger credit union with which a merger would develop more complete service for the smaller credit union's members. In other instances, two credit unions of approximately equal size merge as a means of enhancing member value with improved efficiency and productivity economies of scale afford you.
On January 28th, Rich Helber, CFO of GTE Federal Credit Union (GTE’s merger strategy was covered in Part I ), and John Bommarito, CEO of Western Federal Credit Union, shared their merger stories with interested credit union executives at a Callahan & Associates’ webinar event. Rich and John brought different experience to the table, as the merger scenarios they have encountered reflect the different catalyst scenarios described above.
Western and TRW Federal Credit Unions merged in the second quarter of 2003. These credit unions were very similarly situated. They were equal in size with an eerily similar geographic concentration of member households; and both were highly capitalized and well managed. A merger provided an opportunity to double the size in terms of asset dollars as well as doubling the intellectual assets by combining the experienced and committed staffs.
As John saw it, the guiding principles of a merger are (in order of importance):
- What is in the best interest of the members?
- No such thing as "good enough" for the members
- Size Matters
- What is in the best interest of the credit union?
- Size = Resources to remain competitive in an ever-changing marketplace
- What is in the best interest of my colleagues?
- Substantially more growth/development opportunities for staff
- What is in my best interest?
- Check your egos at the door
- BEST PRACTICES PREVAIL!
By consolidating some services and allowing best practices to prevail Western has been able to provide better and more complete member service with substantial costs savings. These costs savings have enabled Western to lower fees (including free Co-Op ATM usage), issue better rates, and provide more delivery channels and extended service.