By Frank J. Diekmann
Take a survey in a church, and you’ll conclude the evidence is clear--Americans remain believers. Poll fans at a baseball game and you’ll find everyone agrees a funnel cake chicken sandwich layered with maple syrup and strawberry jam (an actual menu item) and an imitation bat filled with 32 ounces of soda is a healthy choice. And participate in a webinar with the leaders of smaller credit unions and you’ll exit confident no one is interested in merging and the obstacles surrounding them can be overcome.
So, all that’s a long way of saying you always need to take “context” into account before lacing up the sneakers and jumping to any kind of conclusion.
A great example is the recent Underground Boutique Xchange hosted by Mitchell Stankovic & Associates as part of its ongoing Underground series, this one the first aimed at credit unions of less than $300 million in assets. The meeting was themed, “Hell No, We Won’t Go Away.”
The conviction is admirable. But how representative is it really? Listening in to the discussion—and having had the privilege to lead some of the discussion breakouts—it was easy to end the webinar and start the lacing up process.
Two Big Questions
Asked to name their top concern as the leader of a smaller credit union, respondents answered as shown below:
Two critical notes on those poll results:
- First, talk to the leaders of most small CUs and you won’t get far past the hello’s before the conversation turns to what it feels like to constantly be on the receiving end of pitches to give up the grind and just merge. That cooperation thing that should be all about larger CUs offering to help their smaller brethren better serve their members and grow? Instead, it seems to increasingly imply smaller CUs cooperating by just signing off on the combo.
- Mergers and acquisitions were listed as the least of the five concerns from which leaders of the smaller CUs could choose, with resources and strategic influence in a tie for the top worries.
Not Waiting for the Phone to Ring
So, what to make of all that implied determination and moxie? I’d suggest beginning with the context. The participants in the Underground Xchange are a self-selected focus group; leaders clearly interested in learning from and engaging with others.
In other words, they aren’t the kinds of CEOs waiting for the phone to ring with a merger offer and either a comfy VP position or a retirement brochure.
Another piece of context: Interest in being M&A’d may have been last on the list of concerns, but the lack of resources and a perception of their own strategic influence as lacking, combined with a shortage of scale, often add up to, yes, a feeling there is little future other than to answer the phone when the bigger shop is on the other end of the speed-dial.
A Self-Fulfilling Prophecy
For others, of course, they willingly answer those calls, having almost willed them in some cases. I spoke with someone last week who had some questions for me about a merger in which they represented the CU being acquired. The board was described as “tired,” not interested even in a seat or two on the acquiring CU’s board. And the two senior leaders at the CU? Well, they were planning to retire. The management talent pipeline? As empty as the nutrition in that funnel cake chicken sandwich. And that’s 100% the fault of the board and those two managers whom I would say are soon to be put out to the cooperative pasture, but it sounds like they’ve been lazily grazing in that field for some time.
Credit unions of $300 million in assets and below comprise 75% of all credit unions by number—4,255 out of 5,207 federally insured CUs as of March 31. But they represent a far larger piece of the fabric that is the CU “community.”
But most of all those smaller CUs are 99% of the reason the credit union tax exemption remains alive and of benefit to all CUs. And that’s what makes the current state of credit unions in the U.S. so ironic—should we ever reach the day when there are no small CUs left with which to merge, the only merger left to occur will be with a new reality.
Note: In the next column I will share some of the many interesting insights and observations that credit union leaders imparted during the Underground Xchange.
Frank J. Diekmann is Cooperator in Chief of CUToday.info and can be reached at Frank@CUToday.info. Mr. Diekmann is also author of a brand new book, “The Last Lyric,” a humorous satire about a murder investigation at the Rock & Roll Hall of Fame in which every line of dialogue is either a classic pop/rock song title or lyric. Available on Amazon, Apple iBook, Barnes & Noble and Smashwords.