"When you consider the economic downturn, the challenging real estate market, the corporate losses and balance sheet income, there's little doubt the number of credit union mergers will accelerate over the next year," forecast Dennis Dollar, the former NCUA chairman and head of Dollar Associates. He noted a "dramatic" increase in inquiries from CEOs and CU board members in recent months.
Similarly, David Hilton of D. Hilton Associates, a suburban Dallas firm specializing in recruitment and CU governance, said his agency is recording call volume 10 times what it was a year or so ago. Calls are coming in from CUs in California, Arizona, Nevada, Florida and Michigan looking for merger partners as well as from well-situated CUs on the East Coast or in the Midwest shopping for candidates.
"We're hearing from so many, including those being watched by NCUA and the regulators who say they simply have lost so much money they can't afford to stay in business any longer and just want to find a partner," said Hilton.
Dollar said there's little doubt the merger activity, particularly in hard-hit California, is being driven in part by the NCUA, which is encouraging the most troubled CUs to quickly find partners after dismal first-quarter performance and the impact of the corporate problems.
"There's no question regulators are having an impact," said Dollar, maintaining the daily rate of mergers, about one per business day the last five years, will climb to two to three per business day over the next 12 to 18 months.
Echoing Dollar, Hilton said also that the NCUA seems to be devoting more attention to the larger troubled CUs, but "many of the calls come from smaller credit unions" scouting for partners. "We suggest their best bet may be not to look for a large California credit union which is in the same financial straits but with similar field of membership, but to look outside the state."
In those cases, a comparable FOM at a CU in the Midwest or on the East Coast, for example, can prove workable, said Hilton.
Nonetheless, CUs outside the sand states have sometimes been reluctant to court partners given the current economic climate. "Why would we want to look for a credit union in California right now?" asked one executive from a mid-continent CU who asked not to be identified. However, he said, CUs talking merger or others making West Coast forays continue to percolate. "There's lots of talk now about Nevada credit unions getting together."
An East Coast CU on just such a foray is the $1.7 billion Affinity FCU of Basking Ridge, N.J. The CU confirmed local media reports that it sent an executive team last month to southern California cities to root around for possible merger partners.
"Yes, we are familiar with the Victorville mention," said a spokeswoman for Affinity, citing the CU staff presence in a high desert community that has been the subject of news reports on banks demolishing large home tracts facing foreclosure.
"Yes, just like other strong and healthy credit unions everywhere, we are doing due diligence on business opportunities," explained Jean Maisonneuve, vice president of marketing and e-commerce. He said a top-level group of executives met with chamber of commerce officials in several cities in the San Bernardino-area to discuss Affinity's potential entry.
One such account of Affinity "kicking the tires" appeared in a Victorville, Calif., newspaper. Maisonneuve noted Affinity's desire to expand its brand and member reach beyond New Jersey.
The CU has 125,000 members all over the world, "and that includes California and the West Coast," he said.
Indiana CU Completes Merger
The $1.2 billion Indiana Members Credit Union of Indianapolis said last week it completed a merger with the $13 million Marsh Employees FCU of nearby Fishers.
Officials stressed the consolidation, under discussion since last year, represents a combination of two "healthy and strong" credit unions seeing the wisdom in economies of scale and enhanced branch and ATM services.
Until the NCUA stabilization, Indiana Members has been operating with return on assets of 0.91%, finishing up 2008 with nearly $10 million in net income.
The Marsh merger for Indiana Members is its first in three years. The combined organization will have 25 branches in central Indiana plus two Colorado branches.
Chartered in 1958, Marsh had 4,800 members and served employees of the Ohio and Indiana supermarket and pharmacy chain. Indiana Members was founded in 1956 as the Indiana University Medical Center FCU.