A slew of credit union mergers this month underscore strategies for the future.
For $7 billion The Golden 1 CU of Sacramento, the opportunity to merge the struggling U.S. First CU, which maintains offices in San Francisco and San Mateo, "provides an important entry into the Bay Area," explained Theresa Halleck, president/CEO of The Golden 1.
Theresa Halleck, president/CEO of Golden 1, called the decision by U.S. First to merge into The Golden 1 "a prudent move" and one that benefits both CUs. U.S. First lost $1.6 million in 2008 and $3 million in the first quarter, including the corporate expense. Founded in 1937, it has 11,000 members.
Halleck said her CU remains open to merger opportunities "but we are picky about only those consolidations where there is a fit."
Likewise, the July 1 merger of the $8 million ALISOS CU of Norwalk into the nearby Camino FCU of Montebello, Calif., creates a $107 million CU with two branches, 14,000 members and a newfound reach into the Hispanic market.
"We've felt the impact of the NCUA and WesCorp write-downs as much as anyone else, but we also were lucky that we started with 12% equity and so the impact has been lessened," commented Robert V. Chaffino, president/CEO of Camino.
Though Camino has enjoyed robust growth since Dec. 31, much of the California economy remains in the doldrums, and CUs everywhere "are on the radar" for mergers, with some CUs more aggressive than others in soliciting partners, said Chaffino.
Halleck observed that the number of small CUs in California seeking partners remains on the rise.
In Birmingham, Ala., Dennis Dollar of Dollar Associates said more mergers in California and the sand states are likely, but many CUs, "while still showing troubled numbers, appear to be pulling through."
Nonetheless, Dollar revised his own forecast for the national merger rate from "one every business day," which has been the pace since 2000, "to three every business day over the next 18 to 24 months."
Dollar maintained field of membership restrictions continue to be the major roadblock to both interstate and intrastate mergers across the U.S., with regulator-sponsored mergers opening the door for broader FOM growth. As an example, he pointed to the June NCUA-engineered purchase and assumption of California's High Desert CU by Alaska USA FCU in Anchorage.
Meanwhile, mid-size credit unions in Ohio and Washington State undertook merger steps last week; the economic slump and need for enhanced services were cited as contributing factors.
In Ohio, $90 million Associated School Employees CU of Youngstown said it is merging in the $60 million Greater Warren Community FCU following talks stretching nearly two years, but moved to the front burner by "the poor economic climate in northeast Ohio," where mortgages and foreclosures remain troublesome.
Associated-which merged a smaller Ohio CU in April-said the Greater Warren consolidation, effective Aug. 1, will be a cost saver for both CUs; the CUs had overlapping school-employee FOMs. The combined CU will have eight offices.
Under the merger, the president of the Greater Warren, Brian McCue, will become chief financial officer.
In April, Cavalier FCU in Lordstown was merged into Associated. Its former CEO, Robyn Daroch, is chief operating officer of Associated.
In Washington State, members of the $55 million MilePost CU of Tacoma last week approved a merger into the $420 million Sound CU, also of Tacoma.
The combined credit union will serve 44,000 members with 13 branches in Pierce, Thurston and King Counties.
Richard Brandsma, president/CEO of Sound, said that the issues with MilePost "are typical of many small credit unions that want to add more branches or services but simply can't because of the financial pressures."
He noted that credit unions "don't like to merge, but sometimes that is the best solution" in order to flourish.
MilePost had recorded a $1.5 million loss for 2008 and a $613,000 loss in the first quarter of 2009.
Economic conditions for CUs in the Northwest remain tough as unemployment continues to rise and losses mount, he said.
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