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DURHAM, N.C. -At a time when NCUA officials are expressing increased concern over the dwindling number of small credit unions, one credit union sponsor here has found that mergers are sometimes the way to go for struggling small CUs. Late in 2002, the North Carolina Minority Support Center helped reorganize and re-charter a floundering credit union called Gateway into Generations Community Credit Union, currently an $8.1 million credit union headquartered in Durham, North Carolina. The support center, which specializes in helping community groups obtain credit union access, hoped turning Gateway around would both preserve a field of membership at risk as Gateway faltered, as well as provide a vehicle the Center could use to more speedily get new groups credit union services. “We meet with many groups throughout the year that would like to have a credit union,” explained Tanya Branch, CFO for the Center. “But as everyone knows, starting a credit union is challenging and takes a long time. So, with Generations we hoped we could offer interested groups a chance to have a branch of Generations in their area to offer them services which would be easier and faster than an entirely new credit union.” Because anyone who becomes a member of the Support Center can become a member of Generations, the credit union effectively has a statewide field of membership which further facilitates the process. But as much as Generations wanted to help further the spread of new credit union services, the credit union found itself merging smaller struggling credit unions more than opening branches to serve new fields of membership. “There is no doubt that mergers were the last thing on our minds and our last option when dealing with these credit unions,” Branch said, “but when we were faced with credit unions under regulatory pressure to merge or close, we had to think about how to preserve those communities’ access to credit union services.” Four of the five credit unions that have merged with Generations since the credit union opened its reorganized doors in early 2003 had to do so under pressure from their state regulators, Branch said, an action that she assumed had its roots with NCUA. The fifth credit union had been a sole sponsor credit union which had originally served the workers at a J.P. Stevens textile plant which had reorganized once and then closed, Branch explained. “After the closure was announced they looked at their situation and decided that merging was probably their best course,” she added. Generations had been conscious of having to help the credit unions make the most of a bad situation and had sought to make the best of the pairings, both for Generations and for the merged credit union. For example, each former credit union which became a Generations branch has an advisory board which had input into Generations’ policies which affected the members that used that branch. Also, these advisory panel board members were automatically eligible to sit on the Generations’ board and two of them do so currently, Branch explained, so the members of the merged credit union still have a way to have input into the credit union’s policies. Wave of the Future? When they were asked in September 2002 about the possibility that Generations might become an engine for North Carolina credit union mergers, organizers like Daniel Broun had downplayed the possibility. Clifford Rosenthal executive director of the National Federation of Community Development Credit Unions had said it was something the Federation was studying but about which it was reserving judgment, and Rosenthal was unavailable for comment on whether the Federation had evaluated the Generations experience. Now, in the wake of the five mergers, Branch said she hoped and expected that Generations’ last coupling, in May of 2004, would be its last for a while, but she admitted that the recent trend lines did not seem especially promising. She also defended the mergers as a regrettable, but necessary, way of preserving credit union services and fields of membership in areas that would be otherwise underserved. “Nobody likes mergers,” she said, “and mergers are definitely not the first option, but when the regulator is saying that the options are merge or close, merging and preserving access to credit union services and preserving fields of membership make a lot more sense.” She also said that despite the five mergers, the Support Center continued to work with groups that were willing to either accept a Generations branch or to persist in starting their own credit unions. “The demand for credit union services hasn’t gone away,” Branch said, “not at all.” -

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