WILLIAMSBURG, Va. — When it comes to mergers when is the right time to bring it up?

At the National Association of Credit Union Chairmen's 31st Annual Chairmen's Roundtable Forum attendees say given competition, shrinking margins, eroding capital and regulatory restriction, credit union mergers are a reality that boards should be talking about sooner rather than later.

At a roundtable, with chairmen from credit unions ranging from $63 million in assets to $1 billion in assets, the greatest merger challenge may be the "Pac Man" theory–where every credit union wants to be the surviving one. At the roundtable alone only two out of the 10 had developed a plan for either scenario.

"Ultimately the decision to merge is based on whether it is in the members' best interest, but the conversation about what do we do if approached to be the 'mergee' rather than the surviving credit union is something that has to happen today before the

actual event not once you are approached," said one chairman.

Another chairman added that the "need" to merge is dependent on perspective.

"There are plenty of small credit unions out there that believe they are serving their members' needs quite well and will look at any larger credit union trying to talk them into a merger like they are crazy and will tell them to go away," said Northland Area Federal Credit Union Chairman Howard Spencer. "Want proof that bigger isn't automatically better–look no further than the firefighter credit unions–they may be small but their members are very happy and satisfied."

The decision is also one that many boards take personally and while many may philosophically agree to do what is best for members once a board is faced with the reality of merging "they start to think about the blood and sweat they've poured into their credit union and suddenly it is a matter of do we get to keep our board seats and that is when it becomes a real tough sell because it gets personal."

One credit union chairman with many longtime board members who are reluctant to change or give up their seats wondered aloud if having term limits could be a way to avoid the "personal investment issue" that hinders many mergers. Attendees thought it might be too drastic a step and offered other solutions.

For E1 Financial Credit Union cold hard facts worked well. Faced with an aging membership, E1 Financial Credit Union turned to a facilitator to help begin discussion of merging as either the surviving or nonsurviving credit union as a future option. The board members' agreement that it was something that needed to be explored was recorded in the minutes.

"At least we have something on paper we can go back to that says this is a course of action that we all agreed on," said Chairman Luchus Mack.

To avoid the typical "bloodshed" that occurs with merger discussions, First New England Federal Credit Union Chairman Peter Lupi says his board created a profile of the parameters and qualities of possible credit union partners.

"It makes it clear up front and you spell out if you want to be the surviving credit union or not so you don't waste any time," said Lupi. "If the merger option doesn't fit in our parameters then the board has to vote, if it is a fit then the CEO can just move ahead."

Deciding the deal breakers now rather than later also helps the process go more smoothly. Factors to consider include whether the current board will be the surviving one; will the credit union retain its identity; will the credit union be forced to take the existing management team and in what capacity; will the employees be protected; and if the credit union will have to provide buyouts. The general consensus at the roundtable was that "either there is a growth policy in place or you have to merge because you can't stay stagnant."

For Community First Credit Union of Florida Treasurer Marcha Coarsey the merger issue represents a greater challenge for the credit union movement as

a whole.

"These mergers aren't really generating growth of the movement as a whole so what does that mean for the long-term survival of credit unions," said Coarsey.

Mantanuska Valley Federal Credit Union Board President Norma Benson pointed out that years ago when she attended an annual meeting one of the guest speakers said that there would be only five credit unions left in Alaska.

"At the time of that meeting there were 44 credit unions and we just laughed," said Benson. "Well now there are only about 12 credit unions in Alaska

and the idea of five credit unions isn't a laughing matter today."

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