WEST PALM BEACH, Fla. – While only 16 of 51 credit union leagues so far have felt the sting of losing an affiliated credit union because of a merger to a non-CU charter – albeit two were billion-dollar CUs – just about every league has seen the number of affiliated credit unions decline because of mergers and consolidations. League presidents, in fact, say this trend is having a more significant impact on their dues coffers and is forcing them to consider alternative ways of delivering services. When Georgia's Atlantic Coast FCU converted in 2000 and AGE FCU converted in 2001, both to a mutual holding company, they were at that time two of the largest CUs to convert out of the credit union system – Atlantic Coast had $321 million in assets, and AGE had $269 million. Georgia Credit Union Affiliates President/CEO Mike Mercer said the league's dues formula then was almost the same as it is now – asset based and a regressive formula where the increase increments get smaller at the higher asset levels, but there's no cap. He estimates each of the two credit unions withdrew about $25,000 a year from GCUA resources and another $10,000 each from CUNA resources they participated in by their conversions. “But that's just the tip of the iceberg,” said Mercer. He explains that both credit unions were very active in other GCUA programs – both brought their entire boards to the fall annual meeting, including seven to 10 registrants; they each routinely participated in self-study programs and the education program, “so they're conversions were a huge withdrawal from our education budget,” says Mercer. Atlantic Coast and AGE also actively used GCUA's business activities such as check processing, EFT, credit cards and ATM services, “so their impact was greater there by a factor of three,” he said. Fewer CUs, Less Money All together, Mercer estimates the impact of business lost from the conversions of the credit unions to be $100,000 across all the GCUA businesses at the state level. Of course, the conversions also meant GCUA saved money on providing the services to the two CUs, but Mercer estimates that only amounted to about $25,000. “The absence of those two credit unions had the impact of removing a full-time person in our advocacy area. The dues money they brought in would have paid for one more person in our advocacy function,” he said. Add to that the business each credit union did with Georgia Central Credit Union – he estimates each had about $30 million with the corporate – and that money was sent back to the CUs. “The conversion of the two credit unions to noncredit union charters had a massive impact, but the greatest impact was on the business side,” says Mercer. Still as great an impact as the conversions were to GCUA's business, the greater affect, over time, has been from consolidation. Consider this: In 1979, there were 475 credit unions in Georgia; there are currently 190. All but two of the 285 credit unions lost were due to mergers and consolidations, “so that's the profound thing that's going on,” said Mercer, offering that unlike converting credit unions that impact the business side of league affairs, mergers have a more substantial effect on the dues side. Granted, mergers somewhat “cushion” the impact on dues, “but not by much,” said Mercer. For example, a $15 million CU would pay $8,800 in dues; if it merged with a $100 million CU, because of the lower unit dues rate, the surviving CU would only pay $339 additional in dues. Texas Deals With Two Mega Conversions That situation is mirrored in Texas. The Texas Credit Union League has been in the news most recently because of the conversion to mutual charters of $1.4 billion Community CU and $1.2 billion OmniAmerican. But even before these two made headlines, two other Texas CUs converted out of the system – Share Plus FCU, $150 million, converted to a mutual charter in 2004; and Affiliated Federal, $9 million, converted to a mutual charter in 1998. The Texas League has a similar dues structure as GCUA, and Community CU and OmniAmerican were both in the $21,000 annual range. Like their counterparts in Georgia, CCU and OmniAmerican also actively used TCUL's services, especially CCU which was the biggest user of the shared service center. Both were also very active politically and involved in their communities. However unlike the Georgia CUs, Texas Credit Union League President/CEO Dick Ensweiler said CCU only sent a small delegation to the league's annual meeting, and OmniAmerican typically didn't send any representatives. But as big a loss as the league and the national credit union system was dealt from the conversions of Community CU and OmniAmerican, Ensweiler says like GCUA and other leagues around the country, the bigger culprit of the loss of CUs is mergers and consolidations – Texas has been losing about 20 CUs a year for the last three years mostly due to the mergers of small credit unions that are either having difficulty growing or their manager retires and there's nobody else to run the CU. Ensweiler agrees with Mercer that “the compensation of extra dues collected from the surviving credit union doesn't make up the difference of what's lost from collecting from two separate credit unions.” He gave this example: If a $2 million CU that pays $1,000 annually in dues merges with a larger CU, the surviving CU “may only pay pennies more in dues. Once you get into the big asset numbers, it takes a lot to raise the bar to make a difference,” said Ensweiler. Despite the sacrifices both leagues have had to make because of their diminished dues coffers, both presidents agreed the one area they will not compromise on is advocacy. “If the leagues aren't doing the advocacy function, nobody else is. This is a sacred trade association activity,” said Mercer. A few years ago, GCUA formed the League Finance Task Force that meets every two years to review the league's goals and create recommendations on ways to pay for the implementation. According to Mercer, over the years the league management has moved some services out of the dues-funded trade association side into the fee-for-service environment, or outsourced to a third-party. It's also done various collaborations. “We've attempted to do all of this while growing our capabilities in the advocacy area,” said Mercer adding that this year the Task Force is going to do a five-year out scenario based on 100 credit unions, instead of 190 CUs there are now in Georgia. Meanwhile in Texas, the league chairman is in the process of organizing a dues study committee. The last time the league's dues structure was changed was four years ago, and Ensweiler said it passed without an inflation factor. He said that's made it difficult for the league to be able to grow with those credit unions that are growing the fastest, the largest CUs in the state. “We're taking in less dues dollars now than we did previously, and that will continue unless we can revisit our dues formula because of the mergers in the state among credit unions,” said Ensweiler. What's happening in Texas and Georgia is symptomatic to what all credit union leagues are dealing with, and Ensweiler points out that this goes beyond leagues' dues formula. “As leagues we're also looking at how we can cut our costs and operate more efficiently. We're all going under our own microscope,” he said. ” We need to make sure we're doing all we can before we go back to our credit unions to ask for more dues,” said Ensweiler, noting that at the recently held meeting of the American Association of Credit Union Leagues in Naples, Fla., the topic was brought up of how leagues can share resources and collectively find solutions to be more efficient in the face of a declining number of credit unions. AACUL Chairman Rick Pillow, president/CEO, Virginia Credit Union League, confirmed that, “ As consolidation continues to occur it is a critical issue for all leagues.” Even in Virginia, Pillow said the league is working through a new dues proposal to take to its members in May. The Virginia League's current dues formula has been on its books for 13 years – the cap on dues is $14,000 – and Pillow said the shrinking number of credit unions in the state makes it necessary to consider removing the cap and replacing it with a Consumer Price Index factor. Twenty-five years ago there were 400 CUs in Virginia, and there are now 220. The decline is due to mergers and acquisitions. Pillow said the League plans to hold town hall meetings starting in March in all its chapter areas. He also agreed with Mercer and Ensweiler that, “The one place you can't cut corners is with advocacy. If anything, leagues have to be more active now than in the past.” -

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