From the Twin Cities to St. Louis, the pace of credit unionmerger deals in the Midwest was steady this month.

Reflecting recent U.S. trends, the smaller CUs appeared mostvulnerable, with some troubled institutions succumbing toconsolidation with healthier partners.

A case in point was quickened regulatory action in Minnesota tospur the state's second largest credit union, the $1.3 billionAffinity Plus FCU of St. Paul, to merge ailing the $37 million ComoNorthland Community CU, also of St. Paul.

Triggered by large Como Northland loan losses on a souredNorthern Minnesota resort deal and mortgage defaults, that deal isexpected to be completed by yearend. Affinity Plus will take overComo Northland's lone branch and 8,000 members. Como Northland lost$1.2 million last year, recording 4.5% net worth. The credit unionhad approached Affinity Plus earlier this summer about a mergerafter NCUA encouragement.

Like other Midwest CEOs, Kyle Markland, president/CEO ofAffinity Plus, said the plight of many small CUs in the Midwest andelsewhere can be traced back to the poor economy, continued slowloan growth, aging boards and NCUA assessments.

The earnings pressure continues to remain strong and I think thecurrent climate begs for capital reform,” Markland said. Otherwise,“we will see many more mergers of all size credit unions.”

Meanwhile, CU merger proposals in both Illinois and Missouricontinued to make news.

After five months of discussion, the $260 million Argonne CreditUnion of Romeoville, Ill., said it expected to complete a merger ofthe nearby $70 million Prairie Trail CU of Joliet on Sept 1.

Both CUs are healthy with capital ratios at 9%. Prairie Trailsaid the merger would make economies of scale possible.

The combined CU will have branches in Romeoville, Joliet,Plainfield, Lockport, Frankfort and Woodridge as well as in JolietCentral and Joliet West high schools. The CU also retainslimited-access branches for employees of Argonne NationalLaboratory and Fermilab.

The combined CU will serve more than 25,000 members, making itone of the largest in the state, according to a statement.

As part of the transaction, Prairie Trail's NCUA insurance isbeing converted to a private carrier, American Share Insurance ofDublin, Ohio. Brian Cedergren remains president/CEO of Argonnewhile Matt Thraen, Prairie Trail CEO, will become president of theJoliet Division.

In Missouri, the $180 million Gateway Metro Federal Credit Unionof St. Louis said it has completed a merger of the ailing $400,000Holy Infant CU, also of St. Louis, with more possible mergers ofsmall CUs on the drawing boards. The merger marks the fourth parishCU takeover for Gateway Metro. The credit union's strategy,explained President/CEO David Barton, is to reach the youth marketthrough student-assisted branches in parochial schools.

Gateway sponsors such branches at three Catholic elementaryschools and opened another branch at Trinity Catholic High Schoolin St. Louis last spring.

“We are negotiating now with a couple more which have approachedus,” Barton said.

In addition to reaching students, the branches are helpful tothe CU in reaching the parents who bring their kids into theschool.

Barton said the concept has worked well considering the creditunions' aging membership. The age of the average Missourian, 37, ismuch lower than the age of the average Missourian CU member, 47-48.Gateway Metro's goal is to drop its average member age to 43,Barton said.

Across the U.S. border, the $1 billion DUCA Financial ServicesCredit Union of Toronto announced Ontario's first CU merger inyears. DUCA said it has begun discussions to acquire the $160million Virtual One Credit Union of Mississauga with an effectivecompletion date of Jan. 1, 2011.

Virtual One will add five branches in southern Ontario and 8,700members to DUCA's 12 branches and 35,000 members.

“This is a great fit, both geographically and culturally as thetwo credit unions seek to enhance value for their respectivemembers through additional service locations” said David Bird, CEOof Virtual One. “The merged entity will be well capitalized andwill be able to take advantage of economies of scale as it reachesout to extend its value proposition into new communities.”

Jack Vanderkooy, president/CEO of DUCA, said merger conditionsfor small CUs in Canada remain parallel to the U.S. since in bothcountries unions are triggered by advances in technology and thechanging nature of boards.

But the Canadian economy has been healthier and has not beenbeset by large loan losses, he said. And the result is “fewerforced mergers” compared to the U.S, he concluded.

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