Mergers on the Minds of Small Kansas CUs
Last week as many as eight CUs quietly or publicly looked for partners.
At least two, the $3.7 million Sunflower CU of Arkansas City and the $3 million Leavenworth Teachers & Community CU, have made their intentions clear as proposed mergers got under way with larger peers in Wichita and Lenexa, respectively.
In both cases-Sunflower partnering with the $141 million Mid American CU of Wichita and Leavenworth Teachers with the $230 million CU of Johnson County-the inability to offer members a cost-effective, full menu of products and services played a role.
Leavenworth Teachers put itself on the block two months ago, informing the Kansas Department of Credit Unions of its intention to seek a partner.
"They responded favorably to our offer," said John Beverlin, president/CEO of CU of Johnson County, noting the two CUs share a common teacher membership. "Our board has been excited about the merger plan which, once approved, would provide our credit union a chance to serve at least two additional school districts."
At the same time, Beverlin said, CU of Johnson County already retains 600-700 members in Leavenworth.
Beverlin said there could be "as many as seven or eight" small Kansas CUs that are now looking seriously at merger opportunities.
James Holt, the president/CEO of Mid American, said his CU has extended a merger bid to the ailing Sunflower which, if approved, would permit Mid American to further expand in Cowley County.
Mary Strange, president/CEO of Sunflower, confirmed merger discussions with Mid American have been under way for months "considering the additional benefits our members would receive" and in light of the technical and operational assistance the Wichita CU has been providing to Sunflower in 2009.
Sunflower, which sought FOM expansion into neighboring counties, has suffered loan losses the last five quarters and ended 2008 in red ink by $130,000. Strange said manufacturing downsizing in her south-central Kansas community has contributed to a slow economy.
Meanwhile, Richard Yadon, the chief examiner in the Kansas Department of Credit Unions, said the agency was only aware of the voluntary Sunflower and Leavenworth applications and at least "one other in which the parties from mid-sized credit unions are keeping secret."
But the agency is familiar with the struggles of small CUs in the state and, in line with policies at the NCUA, the department has waived 2009 examinations fees on a one-time basis for the eight CUs with assets under $1 million, said Yadon, the department's financial examiner administrator. Kansas has 84 state-chartered CUs.
Apart from the poor economy hitting some locales, Yadon said "an aging board of volunteers and management" has also been a problem for small CUs in the state and elsewhere. "They are at the end of the line and nobody who can continue on," observed Yadon.
Jerel Wright, assistant vice president of government and regulatory affairs for the Kansas Credit Union Association, said he was unaware of any surge of merger applications though it is possible.
Nonetheless, economic conditions in Kansas "are not much different from the rest of the country," with unemployment at 9%. "We will be anxious to see how Kansas credit unions are faring in the June 30 call reports" based on the corporate expense, said Wright.
Yadon added that the lack of new CU charters remains a troubling issue for the industry.
Holt said the new online REALTORS FCU is a promising development for new charters for professionals, but it is disconcerting there are so few new CU formations. "I thought we would see new charters being started by lawyers, doctors and others but it hasn't happened."