Given current stagnant growth, aging boards and NCUA assessments, the industry need not be surprised by more small credit union mergers, the CEO of the $1.3 billion Affinity Plus Federal Credit Union, forecast Monday.
"The earnings pressure continues to remain strong and I think the current climate begs capital reform," declared Kyle Markland, head of the St. Paul based CU, second largest in the state which itself is in the process this week of merging a small and troubled competitor, the $37 million Como Northtown Community CU.
Como Northtown, which lost $1.2 million last year and recorded 4.5% net worth, approached Affinity Plus earlier this summer about a merger after NCUA encouragement, said Markland.
The CU had suffered large loan losses on a Northern Minnesota resort deal that had soured plus mortgage defaults, officials said.
Markland said while the Minnesota economy has fared better than most other parts of the country, small CUs remain vulnerable and so there could be more statewide mergers ahead though Como Northtown is the first for Affinity Plus in 10 years.
Affinity Plus, he said, has been approached by NCUA in recent months about prospective merger deals in western states but has turned offers aside based on what it sees as strategic areas of growth within Minnesota. Como Northtown with its St. Paul branch, said Markland, fits well into Affinity's growth plan in the metro Twin Cities. .
Markland said, however, that the merger of Como, expected to be completed by yearend, underscores the urgent need for alternative forms of capital undertaken through reform legislation or with "systemic level changes." Otherwise, "we will see many more mergers of all sizes,"