By Ray Birch
MADISON, Wis.—While many small CUs understand why there can be a need to merge, such as gaining greater scale and adding more products for members, it’s also just as important for a small shop to know when not to combine, according to one CEO.
During a recent Filene Research Institute webinar on mergers, Linda White, CEO of the $96-million Upward CU in Burlingame, Calif., shared how that kind of acumen is critical for small CUs.
“I recall one occasion where a credit union sought us out—a smaller credit wanting to merge with another small credit union,” explained White. “It was a healthcare credit union.”
White recalled traveling to that cooperative and meeting with the CEO.
“The goal was to understand what was their reasoning for wanting to seek out a merger partner,” White said. “And when I got there, and I looked at all that they were doing, and I saw that they had so much opportunity because they were based on the Hopkins Hospital campus... It was like the world's complete, the world was at their feet. They had so many opportunities to market to that segment. I looked through their loan documents and I said, ‘There's a lot of opportunities here and I can share with you some marketing strategies.’”
‘Go Out & Get the Business’
White said the CEO then asked her if she thought the two organizations should combine.
“I told them I did not think we should,” recalled White, who added her credit union has completed successful mergers. “I said I think you still have a captive audience and you are making money. You have capital, just get out there and get the business. In the end, I just don't think they wanted to do the work because they ultimately did merge with a much larger credit union.”
White said that for her credit union, too, the combination didn't make sense logistically “because of the distance, and that was a while ago and things were not so digital then. Like the healthcare credit union that sought me out, it was about knowing we weren't ready, or we didn't need to merge, and having a plan to make the right decision.”
A Big Advantage
During the webinar, Filene Research Director Paul Dionne pointed out many of the common reasons for mergers, which are also reflected in CUToday.info extensive merger reporting.
Paul Dionne
“(Through the combination) a larger credit union can enjoy greater membership and asset growth. They can use the merger as an opportunity to expand their field of membership and to new areas. They can grow their number of established branches,” said Dionne, citing Filene data. “Sometimes the merger allows an opportunity to get access to new branches that are already set up and running. And, it also provides a balance sheet improvement in terms of contributing to a more diverse lending portfolio. So, your book gets more diverse, it reduces some of the concentration risk. And that can be a big advantage.”
Dionne added that mergers can help smaller credit unions see improvements in their digital channels.
“They can see improvements in the products that they're offering and provide better rates—all of that is what we found in our research over the past two decades,” he said.
‘Three Ways to Go’
White emphasized that a decision on whether to merge can be based strictly on business/operations reasons, cultural difference should carry just as much weight, she reminded.
As White prepares to retire in September, she addressed an issue that has been pointed out by many within the movement—small CU succession planning, and often a lack of it.
“One of the things I have talked with my board about in recent years is we have three ways we can go: We can like look outside or inside for my successor, or merge,” said White, who described the “payouts” that leaders of some small shops are taking from a merger is unsettling. “We decided that we were viable and sustainable, and that merging out was not something that we needed to do. I think it's a tragedy if somebody's using that as their succession plan, but I don’t think (NCUA) should regulate (the succession planning process). I absolutely think people should have succession planning, but what a succession plan will look is different for everybody.”
‘A Letter a Week’
White said she is comfortable with leaving her credit union.
“I used to get a letter a week about someone wanting to merge us in,” said White. “One of the reasons I tell people I'm retiring is that we have somebody on staff who is ready, willing and able to go. So, this is a good time to go. People need to remember that somebody can ask you to merge, but that doesn't mean the time is right.”
In a separate Q&A with CUToday.info, White shared thoughts on her career, credit unions, lessons learned and more here.