If you're a recent member of Cascade Federal CreditUnion in Seattle and the credit union merges, you'll have a littlemore money in your account, thanks to a no merger guarantee.

The credit union has put it in writing on its Web site sayingif, as the result of combining with another financial institution,one of three things happens within two years of the originalmembership, CascadeFederal will pay members $100. The guarantee applies if thecredit union changes its name, alters a member's account number orcloses a primary branch.

This is not a gimmicky, new trend. Dale Kerslake, president/CEOof Cascade Federal, said the guarantee actually dates back to 1997when members complained about mergers at other financial institutions they belonged to. Atthe time, several community banks had merged and members werefrustrated. To reassure them that a merger wouldn't happen atCascade Federal, the no merger promise was made.

Kerslake noted that since the credit union doesn't plan ontaking any of those three steps, it's really a non-issue. Thecredit union adds about 100 new members each month, so if theguarantee were ever paid it would cost the credit union about$250,000. With assets of $258 million and $27 million in net worth,the payout wouldn't be significant.

“I was accused by one of my fellow CEOs of offering theguarantee as kind of a poison pill. It would be a pretty smallpill,” Kerslake quipped.

While he doesn't condemn all mergers, he acknowledged someskepticism towards them.

“In general, I think some mergers are a good idea,” Kerslakesaid. “But probably too many of them are cases of managementlooking to make things better for themselves and putting themselvesahead of the credit union.”

Would Kerslake reconsider if a small, struggling credit unionapproached Cascade Federal seeking a merger?

“I've been here for 30 years,” Kerslake answered. “I haveactually had several offers to merge with smaller credit unions. Iguess I was naïve in thinking we could help the smaller creditunion. In every case, those credit unions ended up merging withanother credit union, so I really didn't accomplish anything.”

He added “I think small credit unions are very important to theoverall health of the industry. Each time we lose a credit union,we lose 10 volunteers. In the last five or six years, we've lost3,000 credit unions, so that's about 30,000 volunteers who are nolonger in our grass roots ranks.”

Although the guarantee is for people who joined Cascade Federal,Kerslake said if he were to take in a smaller credit union, hewould probably apply it to members of that credit union.

While he doesn't think the pledge has drawn a lot of members whowouldn't have joined Cascade Federal, it does offer a littlereassurance that members won't experience frustration that willcause them to look for another financial institution.

Kerslake said he hasn't seen other credit unions adopting asimilar guarantee but if it sounds worthwhile, simply do it, hesuggested. As far as he's concerned, it's prettystraightforward. 

Denny Graham, president/CEO of FI Strategies LLC, a strategicplanning firm in St. Louis, has offered advice on encouragingmembers to approve mergers. He thinks Cascade Federal has made awise move.

“There are a lot of good reasons for credit unions to merge, butthere are also a lot of good reasons for healthy credit unions –and Cascade is one – to stay independent,” Graham noted “So ifthat's their policy, why not say so?”

Graham said “I haven't heard of it as a trend, but clearly thereare a lot of credit unions that have no intention of beingacquired. If that's the case, why not make it public? It's a greatPR move. The public is certainly tired of seeing signs changed ontheir financial institution.”

He agrees with Kerslake that even if Cascade Federal had to payoff on its promise, it wouldn't be a major blow. Looking closely atthe guarantee, he figures that even if a merger did occur, itreally wouldn't affect that many members.

While other credit unions may not have a written policy, somehave taken a no-merger stance but have simply not publicized thatdecision, said Tom Glatt Jr., founder of Glatt Consulting in Wilmington,N.C.

“If I were on the board or a member of the management team, Iwouldn't want to restrict my flexibility,” Glatt explained. “Younever know when a merger possibility may present itself, andcertainly if it makes sense and is truly beneficial to the members,you're adding another cost you have to account for in evaluatingthe merger decision.”

Glatt said “at the end of the day, if they're inclined to paythat kind of dividend to facilitate a merger, they're just statingpublicly the strategy they've decided on. I don't know that I'dadvocate it, but it's certainly interesting.”