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With more good-size credit unions tying the knot recently, the urge to merge seems to be gaining momentum throughout credit union land. And that includes more than just two credit unions becoming one. The days when former NCUA Board Chairman Norm D’Amours almost single handily torpedoed what would have been the first credit union mega merger, are long gone. If Patelco Credit Union, First Technology FCU (now both in the billion dollar class), and Seattle Telco were to attempt to put together their three-party merger today, it would sail right through. Why not? Despite the well-publicized mega merger that didn’t happen, when credit union folks think merger, they usually think that means a small credit union disappearing into a much larger credit union. That in fact does happen a lot. Dozens of small credit unions have already disappeared this year via the merger route. What is appearing on the credit union horizon, however, are serious courtships among ever larger credit unions. Some may be heading to the altar soon. Some, like Western FCU and TRW Systems FCU, two large California credit unions, already did. Before all the marvelous technological innovations available to CUs today, it probably made sense for companies like IBM to have 43 separate credit unions scattered around the country wherever IBM Corporation had a significant presence. Today the IBM CUs are so different from their names sans IBM to who they serve and how, that one giant IBM credit union has zero chance of becoming a reality. But watch for a couple of them to eventually get together. Looking at such things as who a credit union serves, who it would like to serve, its location, the age of the CEO, the strength of the senior management team, the receptivity of some board members to step aside, economies of scale (the main thrust behind the failed mega merger), data processing systems, technological strength, branches, marketing potential, delivery systems, products and services, and its charter, large scale mergers begin to look more attractive to the leadership of a certain number of credit unions. There are other questions that surface in hush, hush merger discussions. As the charter swing to community credit unions continues to pick up steam, does having a dozen or more community credit unions in the same city, competing head to head, serving essentially the same people, continue to make sense? Also, like the IBM situation, is it still logical for the same corporation, like the automotive companies, to have multiple credit unions serving (although no longer exclusively) their employees? Will it be practical as credit unions change to continue to have any number of separate credit unions serving state employees in one state? Or multiple credit unions serving personnel connected to the navy, army, air force, and marines? Time will tell but some feel that there is little doubt that mergers among credit unions of all sizes for a variety of reasons can be expected to make news in the next several years. Some credit union observers see this as a good thing for all parties concerned, but especially the members. Others strongly disagree. Meanwhile, what other credit union related mergers might one day quietly appear on the credit union radar screen? Amidst all the changes taking place among the major ATM players, it would seem that credit unions across the country could benefit if the various credit union owned and operated ATM networks would explore the benefits of combining into a single, national, powerful, non-surcharging, credit union ATM network. Maybe behind some closed doors someplace such a discussion is already taking place? Same with the local, state-wide, regional, and three major national credit union shared branch networks. If all the pieces of that puzzle were brought together, wouldn’t that give credit unions nationwide a powerful advantage over the competition? Why so many organizations providing a mortgage service for credit unions? Wouldn’t fewer, larger, more sophisticated mortgage companies benefit credit unions and ultimately their members? Will all ever get together? No way. Will some? Yes. Credit union foundations might be another area to explore. Why not just one national credit union foundation that would be known simply as the Credit Union Foundation with no political or other ties to any association or other credit union group? The list of possible mergers involving credit union organizations is a long one. There is so much duplication and overlap, and all the money to operate every one of them comes from the same place, namely, credit unions. More examples? Several leagues have joined forces and more combos can be expected. North Dakota and South Dakota? Ditto corporates, a perfect example of consolidation for all the right reasons. Who’s next? Why so many state, regional, and national credit union marketing organizations? And individual groups of credit unions developing their own credit union advertising and marketing programs? Can they get together? What about credit union conferences? Could some of them be combined? Should some be put to rest? How many separate conferences are needed for the purpose of educating volunteers? Then there is the long list of special purpose organizations, many that appear to have outlived their usefulness, but continue to drone on like the energizer bunny. Think what could be accomplished if even only some of these various credit union entities operated as one rather than spend credit union money competing against each other for the same audience with the same speakers and topics. Is there a bottom line to all this? Yes. Sooner rather than later the credit union industry will undergo serious consolidations in all areas. It is inevitable. It is also pretty obvious who will be the winners and the losers. Of course there are two very powerful organizations that do compete against each other but still should not merge. That would be CUNA and NAFCU. But that’s another column. Comments? Call 1-800-345-9936, Ext. 15, or Fax 561-683-8514, or E-mail [email protected]

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Peter Westerman

Credit Union Times

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