MADISON, Wis.—Although the pace has slowed, credit unions continue to merge.
What has changed is that those that are merging are often similar-sized institutions that combine as part of a “collaborative partnership,” according to a new report from the Filene Research Institute.
The report, “Credit Union 2.0: An Opportunity to Build Collaborative Partnerships,” seeks to glean insights from one three-way merger in Wisconsin, a merger that the Filene report says was “made from a position of strength.”
“Mergers are important. A steady stream of credit union consolidations in recent years shows that by combining and consolidating operations, credit unions are creating opportunities to cut costs, increase capital, improve regulatory compliance, diversify labor, and expand product and service offerings,” say the report’s authors. “Traditionally, mergers within financial services tend to involve unhealthy, smaller institutions being acquired by stronger, larger institutions. However, more interesting opportunities lie in aligning interests and developing collaborative partnerships between credit unions.”
To explore how such a collaboration can work, the study examines the merger by Best Advantage CU, CitizensFirst CU, and Lakeview CU, and reviews the steps that were taken to make the merger happen. Interviewed were the CEOs of the three institutions, Tammy Williams, Kevin Ralofsky, and Pat Lowney.
“We were struck by the fact that they had embraced the idea of working together to align common interests,” the report’s authors state. “Their experience supports Filene’s long-held belief that strategic collaboration will be key for credit unions’ continued success.”
The report notes that there has been a trend in mergers away from “takeovers” and toward “mergers of equals” that tend to be closer in size, are financially healthy and in which all parties are “proactive.”
Scale, regulatory pressures, and member demand for more services drive the merger decision rather than economic difficulties or financial performance,” the report states.
The report urges credit unions considering similar collaborative mergers to keep several thing in mind, including choosing the appropriate partner(s), earning buy-in from the board to the staff level, exploring shared interests/problems, and making investments in new products, services and delivery channels.
A copy of the study is available in CUToday.info’s “The Vault.” For info: www.filene.org.
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