Glatt Never Convinced of Wings Financial's Public Reasons for 'Hostile Takeover'
PASADENA, Calif. -- Tom Glatt never bought into the public reasons Wings Financial Federal Credit Union gave for aggressively pursuing Continental Federal Credit Union.
Glatt, president/CEO of $182 million Continental FCU, shared what he believes were the "real" reasons at a May 24 luncheon held during the CFO Forum, hosted by WesCorp and the California Credit Union League's CFO Network. The $1.6 billion Wings Financial has said all along that the merger would have brought more products and services and lower rates to Continental's members.
Glatt said the $1.6 billion CU's "hostile takeover" shifted into high gear because of Continental's "obscene amount of net worth" at 17%, the possibility of a coast-to-coast branch network, and its trade, industry and profession charter, which opened up membership to everyone in the aviation industry.
"This was all about growth potential. [Wings Financial] hit a wall on growth," Glatt said. "You can't tell me greed was not behind this."
On March 9, Wings Financial submitted a merger proposal to Continental's board of directors, who would later turn down the plan. This year's proposal would mark the fourth time Wings Financial approached Continental about merging, Glatt has said. On the same day the proposal was sent, Wings Financial launched a petition and campaign targeted at Continental's members promising to pay each one of them $200 should the merger go through. The petition was a means to encourage Continental's members to urge their credit union's board to enter into discussions with Wings Financial. Despite attorneys for Continental issuing a cease and desist order on April 9 for the credit union to discontinue its "hostile takeover campaign," Wings Financial continued on. NCUA intervened on April 17 saying the $200 payments were not permissible under the Federal Credit Union Act. On April 20, Wings Financial ended its campaign and officially withdrew its merger proposal.
"Is it over? I don't think so," said Glatt on whether "hostile takeover" attempts will continue. "I did see a little bit of division. I saw a split between volunteers in the movement and some CEOs. I received e-mails from [volunteers] saying CEOs said what they thought Wings did was great."
Glatt said he doesn't consider himself or the credit union "a victim" and he understands what Wings Financial did but had a hard time grasping how they pursued Continental. In the end, Wings Financial made several "gross miscalculations" including underestimating Continenal's board and staff, and how the industry would react.
As protection from similar merger scenarios, Glatt urged credit unions to be "totally focused" on member relations and SEG and community relations, review bylaws on member voting procedures, have strong capital and management retention plans as well as formal media training.
"One of the things you have to do, your board chair and management team better have public relations and media training," Glatt said. "I told reporters that I don't expect you to be on my side but I expect you to be fair."
To the skeptics who have said it was only after Wings Financial launched its merger campaign that Continental started adding more products and services, Glatt said a strategic plan was in place well before March 9. In mid-March, the credit union partnered with Credit Union 24 to offers members access to a 40,000 surcharge-free ATM network along with its CO-OP Financial Services' ATM networks. Continental has also extended its branch network through Financial Service Centers Cooperative, Inc.'s 2,400 shared branches and the credit union plans to open three new branches this summer in Philadelphia, and in Chelsea Foods, the official caterer to Continental Airlines, in Houston and New Jersey.
Glatt told attendees that when he took the helm in August 2006, the 17% net worth in place came "at the expense of the membership."
"We didn't have enough systems, technology or shared ATMs. Yes, that's our fault," Glatt acknowledged. "I told my board I would rather have 10% of $1 billion than 17% of $200 million."
Glatt said he was disturbed that Continental's ratios were being reported as low, but equal attention wasn't given to other peers that had just as low performance ratios.
"We had low share ratios, we had share shrinkage, loan shrinkage and membership shrinkage," Glatt said. "We did a computer conversion three years ago. We lost about 4% of our members. [Wings] has lost 6% of their members."
As for NCUA's role, Glatt said in conversations with the regulator, he "didn't think they were going to move."
"I have so much respect for NCUA. It's not over. NCUA has work to do," Glatt said. "Even though the rules say 'thou shall not,' someone will try it again in a different form."