Navy/USA FCU Deal Underscores Sweeping Merger Spike: Dollar
The planned merger by Navy Federal Credit Union of the long-troubled $604 million USA Federal CU is emblematic of a sharply escalating trend which could see another 2,500 mergers by 2015, Dennis Dollar forecast Monday.
"Navy merging USA FCU is a good fit but it is one more example of this growing trend," said Dollar, the former NCUA chairman and a Birmingham consultant.
He said his firm, Dollar Associates, is currently working on more than a dozen mergers and 80% of the phone calls its receives are related to mergers.
While it may concern some, he said, "the reality is that we will certainly find ourselves with fewer credit unions each year but they could well be stronger and better positioned to compete and thrive in a challenging marketplace."
Meanwhile, Tom Glatt Jr., another consultant weighing in on Navy's proposed consolidation of the San Diego CU, said he was surprised the deal had not been completed two years ago based on USA Fed's financial condition.
"USA's problems began before this recession kicked into high gear, and I think they should have begun looking at partners much earlier, perhaps as early as Q1 2008," said Glatt, who heads up a Wilmington, N.C. firm bearing his name.
Nonetheless, he said, "this looks like a great deal for Navy FCU--they expanded their San Diego presence at minimal cost."
Glatt also took issue with another opinion expressed in a San Diego Business Journal article over the weekend that USA Fed was a victim of the recession and erred in returning more of its profits to members rather than putting them aside to enhance its capital base.
"You can return profits to members above the average for the industry and still be successful in a down economy so long as your member value proposition and operating structure supports that strategy," Glatt said.
"Sometimes credit unions overstaff for 'service' but don't retain enough earnings to actually sustain that service in down business cycles. They were not victims of the strategy so much as they were victims of mismatched strategy and member value proposition."