By Frank J. Diekmann
Is the CUNA/NAFCU merger the slam dunk, synergy-creating, kumbaya-combo some people are making it out to be? Maybe not, at least judging from what I’ve been hearing from members of one of the two trade associations.
You’ve already heard the announcement about the two long-time organizations’ plans to combine to form a group called “America’s Credit Unions.” If your credit union has a vote in the proposal you may have already starting digging through some of the early disclosures (you can find some of that here). And if you’re a dues-paying member of NAFCU, it’s likely you’re digging deeper than members of CUNA, because you have a lot more questions.
*The Fine Print
First, an asterisk*, and you don’t need to scroll to the bottom to find the fine print. I’ll tell you upfront what the * is for: those who are dissatisfied are always much more vocal than those who say everything was “fine.” You already know that from members’ social media postings and Yelp reviews.
Now, with the * out of the way and the acknowledgement the feedback I’ve gotten may not reflect an objective review, this note: Since the two trade groups made their announcement, 9.5 out of every 10 people I’ve either talked to or gotten an email from have been NAFCU members, and whether they were neutral toward the proposal or already opposed, what they have in common is a lot of questions.
What immediately struck me in the feedback was how much the proposed combination is similar to that of natural-person credit union mergers--if the members were much better informed about what’s going on than they typically are.
Not a Surprise
It's no surprise that in an industry led by people who are all about the balance sheet, the questions I’ve been getting begin with the numbers. In particular, who will be getting how much in exit packages, and what becomes of the assets of an in-the-black NAFCU should it merge with an in-the-red (as of its last filing) CUNA?
There have been no answers offered to either of those questions at this point, although when it comes to exit packages I’ve heard some interesting rumors from various sources, and those could just be that, rumors. But NAFCU CU members have already begun asking what becomes of that association’s office building on 10th street in Arlington, Va., which the trade group owns. (CUNA leases space in D.C. in the 99M building near Navy Yard, after taking a bath by breaking its former lease because it was actually cheaper in the long run.)
In fact, Tony Hernandez, president and CEO of the Defense Credit Union Council, began to raise that very question during a Q&A with CUNA CEO Jim Nussle and NAFCU CEO Dan Berger during DCUC’s annual meeting last week in Colorado Springs (CUToday.info has industry-leading coverage here).
But Nussle jumped in and answered, “I hope they’re not worried about that. I hope they are worried about the value proposition and creating an all-star staff.”
The Numbers
But in the feedback I’ve gotten so far, NAFCU-member CUs are worried about that. As CUToday.info reported, according to IRS Form 990 data available through ProPublica, CUNA posted a loss of $5.362 million for its fiscal year 2021, following a loss of $9.8 million in fiscal year 2020. For 2021, the trade group had total revenue of $69.54 million against total expenses of $74.90 million. The same 990 information filed by NAFCU shows that for 2021, it reported total revenue of $21.55 million and net revenue of $1.72 million, with net assets of $18.02 million. It showed $1.795 million in net income in 2020. For both organizations, the 2022 financials are not yet available.
Those numbers reflect not just the different bottom lines, but the overall difference in total assets. And that brings another reminder of a natural-person CU merger—the fear by NAFCU members that despite all the reassurances being offered, ultimately the group and its culture are going to be assimilated by the Borg never to be seen or heard from again.
During the Q&A, Berger told the audience, “…I want to make clear…both boards don’t want this to be a CUNA 2.0 or NAFCU 2.0. They want this to be a new organization that is the best trade organization it can be.”
That may be true, but the perception is NAFCU is being swallowed up by the CUNA ecosystem. And a lot of people don’t like that idea, saying if anything CUNA needs to be more like NAFCU than the other way around by getting leaner, especially at the high-salary senior management level.
What is Also Being Asked
I’m not taking a position one way or the other, but here are some of the other questions/issues I’ve heard from numerous other people:
Advocacy
In the wake of the announced merger plan, many in the CUNAverse, especially state leagues, fell all over themselves praising the proposal in what was sometimes over-the-top breathlessness, and the very first review they put on top of the movie poster had to do with “advocacy!”
“America’s Credit Unions will offer the industry one strong and united voice,” the groups proclaimed.
But while CUNA and NAFCU have been more or less in alignment on issues before Congress and regulators over the years, they have also at times differed. NAFCU strongly opposed creation of the CFPB, for example, while CUNA was more sanguine. The two groups have also had different positions on other plans and proposals; who will represent that differing view now?
Perhaps one answer is those state associations, which as they have gotten larger have been more willing to tack in a different direction than CUNA. Both the GoWest CU Association and the Cornerstone League in the last year or two have disagreed with CUNA’s position on certain issues. When there are similar differences in the future, what will happen?
(And as one person pulled me aside during the DCUC meeting in Colorado to say, “Of course the leagues support the merger. They haven’t been merging because they can’t keep up with all the dues dollars. The dues NAFCU-member CUs pay could be used on league products and services.”)
The Other Advocacy
Speaking of advocacy, who will be advocating for the country’s smaller CUs moving forward, and by smaller I mean the two-thirds of CUs that have less than $250 million in assets?
That’s the question I posed to Jim Nussle—who is to lead America’s Credit Unions if the plan is approved—during the DCUC Q&A.
Nussle said small credit unions have “not been forgotten,” and that among the first groups he met with after the merger announcement was CUNA’s small credit union group.
In the case of small CUs, Nussle went on to say the trade groups have been critical to their survival, especially when it comes to compliance and education. In addition, he said the proposed board for the merged organization has a class of directors specifically for smaller CUs to ensure their voice is heard.
I’m not the first person to wonder about the future for smaller CUs. It was one of the first things I heard after the merger plan was announced, which is why I asked that specific question. I sensed there has been some frustration in the trade groups’ leadership over why this question is being asked, and I think it’s because in a landscape in which it’s more difficult than ever to compete with limited assets, there is a natural paranoia if you’re a smaller CU around everything related to your future, that you’re going to be forgotten, and that the trade associations really prefer the higher-dues-paying, fewer-services-demanding big boys. Which is a point you’d probably like to bring up at one of their conferences or events, but you can’t afford to be there.
OK, What Are They?
As you know, CUToday.info provides thorough reporting around every natural-person CU merger, and every single member disclosure form says of the reason for the combo that it will provide “improved products and services.” It’s to the point it feels like the words are just cut-and-pasted from one form to the next.
CUNA and NAFCU have made similar claims. The folks I’ve heard from want to know exactly what better options are going to be on the menu, and that’s especially true for the NAFCU CUs, who are quite keen on the compliance solutions the association offers.
OK, Where?
In addition to the improved products and services, those supporting the merger plan have also cited efficiencies. For example, the Ohio Credit Union League said in its statement favoring the deal that it “will also aggregate financial resources and talent and eliminate redundant and competitive activities to help advance and protect the movement nationally."
Sounds good. But a big piece of those “redundancies” is people. So, who’s going to be shown the door? And, as asked above, who’s getting an exit package and how much?
What If This Doesn’t Go as Planned?
During the DCUC meeting, in a sign at least mildly indicative that at least a few people aren’t lock-stepping in line with those in support of the merger, two audience members had other questions.
The first person asked if there is a contingency plan if the merger is voted down. Nussle said yes.
The second person asked—and I give her credit for doing so in front of a large group—where “those of us thinking of voting no” should go for more information? Nussle urged those opponents to reach out to him, to the trade groups’ respective boards, and to members of the transition board. They should also visit NAFCU.org/merger and CUNA.org/merger, he said.
Those sites offer a lot of information, but they also don’t include a lot, especially in response to the questions being asked by members of NAFCU and outlined above. Rest assured CUToday.info will continue to seek out responses from both trade associations.
Not So Much of a Joke Anymore
Finally, I should note that this talk of NAFCU and CUNA merging isn’t new. It goes back decades. Over the years I had always joked that if the two groups did indeed ever merge the first thing that would happen would be the formation of a new CU trade group.
Will that happen? Who knows? But if the merger vote is closer than some expect, America’s Credit Unions will have its hands full in really demonstrating it represents America’s credit unions.
Let me know what you think.
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
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