By Frank J. Diekmann
Of all the reporting that has filled my notebook in 2023 and all years prior, there is one topic that annually tops the list of issues you want to come back to again and again despite the futility in trying to find some way to make sense of what’s happening—mergers.
Futility? That’s on you, Frank, you’re saying in response: what don’t you get? It’s a changed landscape, a different world, a new reality—bigger is better and efficiency is king! The more cynical among you are reminding that 2024 will mark the 90th anniversary of the Federal Credit Union Act—and it’s not 1934 anymore.
And yet, in the big picture, it’s hard to reconcile all that with the promise of the very business model and all those CU hosannas the community is always singing. And in the smaller picture, well, some of the reasons credit unions cite for needing to merge will have you scratching your head until you’re bald.
As CUToday.info extensively and comprehensively reported on an ongoing basis in 2023 and in many years prior—in fact, more so than any other publication—the merger disclosure forms credit unions must file with NCUA when they are seeking to combine can be:
- Insightful: The honest struggles of some are revealing and vulnerable
- Frustrating: What! Our 87-year-old CEO is retiring? We never saw that coming!
- Baffling: High net worth but no investment in tech, including something as basic as a website. I mean, you can set a website up for nine bucks on GoDaddy.
- Larcenous: One CU had $4,400 in capital per member and it all went to the continuing CU
- Outraging: Big payouts for management but nothing from the CU’s net worth going back to the members
Feeling Rather Odd
Amidst all that, there are also the odd little moments that arise as these pages of credit union, industrial and American history turn one last time before disappearing.
Here’s a strange one I found this year. While members have the opportunity to comment on their credit union’s plans to merge, few ever avail themselves of the opportunity to leverage their CU First Amendment rights, likely because 99% aren’t aware of the option or they’re just apathetic (that’s another story). But in some cases, members do voice objections and concerns, even if they can be baldness-inducing.
The NCUA merger forms break CUs out as the “merging” credit union and the “continuing” credit union. I’m pretty sure I don’t need to explain to anyone reading CUToday.info what “continuing” credit union means.
But that doesn’t apply to everyone.
Responding to the recent merger involving Centra Credit Union in Indiana, which is merging in Northpark Community CU, a member of Centra CU wrote (I assume seriously!?), “I don’t care about the merger, but I do care about the changing of the name of Centra Credit Union to ‘Continuing Credit Union.’ What an absurd name!! I have been a member of Centra for many years and I wish for the name to remain the same.”
Added another member, this time raising a point that applies to a lot of mergers and which also reflects how members view/misunderstand what’s taking place, “There seems to be no apparent benefits for current Centra CU members. The only ones who could benefit from the absorbing the much smaller CU would seem to be the Centra Credit Union senior executives, who will get larger salaries and bonuses [and maybe bragging rights?].”
Peek into History
Mergers in credit unions can also pull back the curtains on little pieces of history. For instance, the NCUA data show Kankakee Terminal Belt CU, which is merging into Credit Union 1, was once one of 12 credit unions in the NCUA database that have or had the name of the Illinois city in their own names. With the merger, there will be just one left: Kankakee Federation of Teachers CU.
If Only We Knew How to Blame
The board of Northwest Louisiana FCU cited four reasons for needing to merge, including my favorite: “Lack of CEO succession planning.” One can only wonder who might have been responsible for that?
Go Ahead & Vote, But…
One CU’s board told its members a merger was in their best interests because “the manager will be leaving the end of January…and both credit unions have signed an executive and management services agreement…” In other words, hey, this thing’s a done deal and the CU interested in acquiring your credit union is already running the show, but hey, in the spirit of a Chinese election, you should still vote.
Plus, We Already Spent All the Money on a PR Firm That Specializes in Spin…
Despite ample capital, another credit union told its members there would be no share distribution because the CU “would not be able to obtain sufficient growth on a standalone basis to project a valuation that warrants any adjustment in shares.”
If BS counted toward your capital, this would have been the most overcapitalized credit union in the country. Not that there would be any payout, however.
Not in the…Well, You Know
It’s amazing the number of small credit unions that are merging out that do not offer any kinds of card services. Not amazing that a small shop can’t afford cards, but that there are still people willing to do business with any institution that only offers some basic savings and loans (in days of yore these were known as “plain vanilla” operations). The members, of course, were/are getting their (profitable) cards from other providers.
Written on One of Those Pages
Before the page is turned and forgotten, among the credit unions that merged out in 2023 was one that still operated from a person’s home and offered no in-person services, just service by phone.
The History, The Irony
As I’ve written before, credit unions are mirrors to the American economy that broadly reflect all of the changes of an evolving market, with some CUs riding the waves of growing (tech) or very stable (government) fields of memberships, and other CUs slowly fading along with their original sponsors.
And that brings me to one of the latter that was among those that headed off into the sunset in 2023--a credit union that served the printing industry (which, ironically/fittingly, notified its members of its merger plans electronically).
Between the Lines
Read between the lines of many of the merger disclosure forms and you’ll find a common refrain that may be unspoken, and yet the words can be heard oh-so-clearly.
Many credit union boards just sound tired. Worn out. Exhausted. You just get a sense it’s the same group of guys--and sadly, often it is all male or majority male board members--who have been together a long time, where the board room is a silo that hasn’t heard an outside perspective or experienced any fresh blood since Luke Skywalker and Princess Leia were flirting , so they just opt to merge, as it’s just easier for them. Not for the credit union or its members—for them.
There are a lot of boardroom conversations that should have taken place 20 years ago. Maybe longer. So, if you’re not having these conversations in your board room now about how the CU is relevant, what your succession plan is and what people who aren’t collecting Social Security are talking about, don’t be putting it off until the 2040s.
Speaking of Exhausting…
I strongly suspect one CU opted to merge because it just couldn’t summon the energy to answer the phone any longer. That would be US Court House Southern District of New York Federal Credit Union, better known, of course, by its abbreviation: SDNYFCUNYFCU. Even with five extra letters that is not a good draw in Scrabble.
A Term That Has No Place in CUs
It’s no secret that many of the smaller credit unions that ultimately seek to pull down the shade on the charter and merge do so after a lot of encouragement by larger credit unions that if, not outright predatory, are aggressive. I’m sorry to say but any time you hear a larger CU talking about “M&A,” its not a deferential reference to Members & Appreciation.
That’s a Real Difference Maker
One credit union this year told its members it needed to merge in order to “differentiate” itself.
One Final Note. Again.
I have shared this point many times, and the reason is it only seems to become more relevant with time, not less. Years ago, Neil Goldman shared an important finding in his research around credit unions and members, which is that the primary reaction by members when their credit union merges is that the credit union has been “sold.”
That observation remains every bit as true today, and it unfortunately reflects a reality that members don’t knowtheir members. It’s why they stand by when their CU doesn’t return any net worth in a merger, because they don’t know it theirs in the first place. It’s why they don’t demand a board look more like them, why more don’t show up at annual meetings and why so few object as forcefully as they otherwise might when the merger notice pops into their inboxes.
So, if you haven’t reminded your members they are members, I’d suggest a certain new year’s resolution.
Frank J. Diekmann is Cooperator in Chief of CUToday.info and can be reached at Frank@CUToday.info. Mr. Diekmann is also author of several new book, including the brand new “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. Mr. Diekmann is also author of a non-fiction compilation of the very best & worst he has seen and heard in covering more than 500 CU meetings and conferences, “501 Name Tags: How Everything You Need to Know About Business Can Be Learned at a Conference & Forgotten in the Trade Show.” It is available on Amazon, Barnes & Noble, Apple, Lulu, and Smashwords