By Frank J. Diekmann
CUToday.info reported two news items last week independent of each other, but which could be linked in the near future. We’ll see just what becomes of what could be an interesting development for the future of credit unions.
The first news item was the latest monthly installment from Glen Christensen, who heads up CEO Advisory Group and who consults on credit union mergers, among other strategic issues. Each month Christensen is CUToday.info’s Eulogy-Giver-In-Residence, offering an overview of all the latest merger activity among credit unions. You can find his summation of January’s activity here.
The second news item has the potential to affect the numbers that Christensen tabulates each month—and here’s hoping it does. In a case of what’s old is new again, CUToday.info has reported in the past on what is often called the “network model” of credit unions, which merges several credit unions under one large “network” credit union, all sharing a common backoffice and systems. The move allows smaller credit unions to gain the advantages of greater scale—such as spreading the compliance burden and lowering operating costs—while still maintaining their local presence and brand. Network credit unions keep their current name but operate as a division of the network CU. A few of these models have been established in the U.S., most recently in Pennsylvania. It’s also a model that’s been popular in Poland.
Now the network CU model has new life thanks to an opinion letter solicited by George McNichols, CEO of Hoosier Hills Credit Union in—do you really need to guess which state? and an advocate on the NCUA board who is championing the idea. You can read more about why McNichols asked for the legal opinion letter here.
That legal opinion letter might have remained in the shadows had NCUA Vice Chairman Rick Metsger not pointed a light at it during his recent remarks at CUNA’s GAC. Critics of NCUA often argue it just wants to be rid of small credit unions (even if many of the heaviest pieces of reg burden come from outside the agency), but Metsger pitched credit unions that the network model holds potential for helping smaller, struggling CUs to not only survive, but to grow.
Metsger told GAC that NCUA’s Office of Small Credit Union Initiatives is looking at the network CU concept, “where credit unions under the cooperative spirit can join under a stronger charter but maintain their local identity and gain greater resources.”
“My pledge to you today is the (Federal Credit Union Act) won’t be an impediment for smaller credit unions to join together,” Metsger told the meeting. “The death of the small credit union does not have to happen.” You can read more about what he had to say here.
Clearing the Red Tape
After his remarks Metsger told me doesn’t plan to carry the network model torch every place he goes. Instead, he said he will serve as an advocate inside the agency for any credit union(s) looking to pursue the model, helping to clear any red tape where he can.
There are too many small credit unions in small towns (and large) that are embedded in their communities to let them fail without making every effort to keep them viable. I get that the world has changed, and “we know our members” isn’t enough to keep a small credit union in business. But that doesn’t mean credit unions can’t change with that changing world. Here’s hoping that credit unions that might otherwise throw in the towel instead grab a lifeline.
Looking at this model yourself? Curious if others in your market are? Please drop me a note.
Frank J. Diekmann is Cooperator-in-Chief at CUToday.info and can be reached at Frank@CUToday.info.