Which Credit Union Stands to Gain More from Delta, Northwest Merger?

FOREST GROVE, Ore. — It remains to be seen whether Delta Community Credit Union or Wings Financial FCU will have the membership growth advantage should the merger between Delta Air Lines and Northwest Airlines go through.

Due to the trade, industry or profession charter the $1.8 billion Wings Financial expanded to in 2004, it may not see many changes in its field of membership, said David Bartoo, president of Merger Solutions Group, a firm that assists credit unions with mergers. However, the airline merger may provide $2.5 billion Delta Community with direct contact and marketing access to more than 31,000 Northwest Airline employees.

“Being very well capitalized and having direct access to the new employee base, DCCU could create a marketing program to provide merger incentives in loan and deposit products to convert these employees into new members,” Bartoo said.

Having changed their name in the second quarter of 2004 from NWA FCU to Wings Financial, the credit union has reported a net decline of 580 members over the past 14 quarters, Bartoo said, adding “so it is

unclear how many of the NWA employees are still active members at Wings Financial.”

Wings Financial did not respond to calls for comment. DCCU has said it does not want to offer a comment on the Delta/Northwest merger.

Although there is not a recent event that could show the results of a large credit union losing a substantial membership base or SEG relationship due to a corporate merger, Bartoo said there are signs to watch following a large field of membership loss.

According to data compiled by Merger Solutions Group and The Watch Reports, at the end of 2007, there were 213 credit unions that reported a decline of their FOM that was greater than 25%. Of these 213 credit unions, 64.8% has a membership decline in 2007, 59% had a decline in ROA and 57% had a decline in their total assets.

“Many of these credit unions with a reduced FOM, are now being looked at by continuing credit unions as merger opportunities,” Bartoo said. “If this proposed merger of the airlines is completed, the results and effect it could have on both credit unions is unknown.”

Bartoo said given Delta Community's size, capital position and potential future ability to directly market to and convert NWA employees to active members coupled with the trends of credit unions that loose a significant portion of their FOM, the gains that Delta Community could derive from the merger of the two airlines could be significant.

“In this type of merger scenario with strong, developed [select employee groups], the gains of one credit union could be the losses of the other,” Bartoo said.

–msamaad@cutimes.com