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From the October-01, 2008 issue of Credit Union Times Magazine • Subscribe!
Amid Turmoil, Small and Medium CU Mergers Remain an Option
VANCOUVER, Wash. -- Small and medium-sized credit unions, given constraints on asset growth, should keep an open mind to the merger option regardless of the upheaval in financial markets.<p>That was a message given to Washington CU executives by a panel of merger veterans who also warned that economic conditions don't look to improve through the rest of 2008 and perhaps into early 2009.</p><p>"Some credit union boards just refuse to look at consolidation, but when you have a difficult economy as it is now, it has to be considered," declared Marla Shepard, president/CEO of California Coast CU of San Diego.</p><p>It is important "to look at what is best for the member" and a merger with a like-minded CU may be the solution, said Shepard, who was joined on the panel by CEOs Robert Schumacher, MountainCrest CU of Everett, Wash.; Thomas Miller, of Affinity Group CU, Pontiac, Mich.; and moderator Robert Harvey, Seattle Metropolitan CU.</p><p>The group spoke during a session of the Washington Credit Union League's annual meeting held Sept. 19.</p><p>Miller said Detroit-area CUs like his are now coping with the negative impact of a depressed auto market "and, with so many members losing their jobs, we thought that a partnership" among three CUs with similar structures would work well.</p><p>That partnership, said Miller, was born 15 months with two other suburban Detroit CUs in which their identities are retained under the Pontiac CU charter. The other two CUs include the former Crestwood CU of Garden City, Mich., and Municipal Health Services CU of Pontiac.</p><p>In a different merger scenario, Schumacher, the CEO of the newly rebranded MountainCrest CU, described a combination last February of Educational Community CU, also of Everett, into Snohomish County PUD CU to form the $90 million MountainCrest made effective May 1.</p><p>MountainCrest now occupies a new $1.8 million headquarters building in Arlington, Wash., and, in a twist, ended up taking back its old building that had been bought by Educational Community, said Schumacher.</p><p>"We decided a merger would be the logical arrangement," said Schumacher, a past director of the National Credit Union Foundation. He maintained that for any two CUs to pursue a consolidation "it is important that the two boards have the right attitude and can be blended."</p><p>Shepard, whose $1.8 billion CU underwent a merger with First Future CU in April, said CU boards need to be open-minded about mergers.</p><p>When asked whether conditions for Southern California CUs are showing improvement, Shepard said the current spate of delinquencies, charge-offs and foreclosures does not bode well, certainly for the remainder of 2008.</p><p>"The bankruptcies haven't slowed down and until things settle down" more troubled times are in the offing, said Shepard, whose own CU reported a $2.2 million first half loss. Still, she said, CUs like hers are seeing a deposit influx from troubled Washington Mutual, which has an extensive real estate operation in the San Diego market.</p><p>Another speaker at the Washington league meeting, David Colby, chief economist for CUNA Mutual Group, said the uncertainty associated with Wall Street financial turmoil does provide significant opportunities for CUs.</p><p>CUs, he said, are poised to weather the current economic storm because of its conservative approach to lending with the industry well-positioned to provide access to fairly priced credit for members.</p><p>"What we do now, when times are tough, will define us going forward," said Colby. When the industry looks back on recent events and what occurs in the future, "I want the leaders in Washington, D.C., to say 'boy, we're ... glad we have credit unions.'"</p><p>--email@example.com</p><p> </p><p> </p>
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