Carver: Credit Union Mergers Undergoing New Turns

SCOTTSDALE, Ariz. – The merger trend for credit unions – both large and small ones – has taken intriguing twists lately with a shift toward what looks to be ideal match-ups, according to Atlanta consultant and former NCUA regional director Allen Carver. Meanwhile, the NCUA apparently cognizant of conditions moved swiftly-in 45 days- in approving the biggest merger in history last April of two $500 million California CUs, TRW Systems Federal CU and Western Federal CU, observed Carver. In a rundown of charter and merger developments, the ex-regulator and head of an Alpharetta, Ga. firm bearing his name, described what he said looks to be successful CU consolidations based on mutual benefits in branching and field of membership. Without identifying any of the CUs-some of which are his clients-Carver said “one of those Baby Bell” CUs with 40,000 members has successfully merged with a government employees CU with 20,000 members. The Baby Bell CU with a wide number of branches, he said, had undergone parent downsizing “with empty lobbies” while the government CU with a stable membership base could not expand its stable member base with just one office. But now the government CU gains access to “a delivery system.” The combination of the two has resulted in a “great fit,” he said. Carver spoke here as a featured speaker at a joint meeting of the Combined Council of Automotive Credit Unions and the National Firefighter Credit Union Conference held Oct. 9-11 at the Doubletree Paradise Valley Resort. The former Atlanta and Chicago NCUA region head also painted a grim picture for the small CU “under $10 million” in assets as the merger trend quickens across the U.S. Many of the “ma and pa credit unions will not survive,” he forecast because of their inability to offer a full menu of services, particularly in technology and on the Internet. Many face “tough times” but “God bless `em” if they are able to prosper. Carver also warned the auto/firefighter groups of banker-led “mystery shoppers” trying to trap CUs on FOM applicants. He said he has heard about instances in Utah of bankers sending in employees to CUs posing as applicants whose member qualifications might not fit regulations. The bankers, he explained, are trying to show that CUs are breaking the law by taking in illegal members. Thus, he said, CUs need to review with staff membership eligibility rules to protect against such traps. In his address, Carver also urged his audience not to overlook recent NCUA definitions and rulings on the “underserved” since there have been recent cases where a choice FOM member base has become available. He cited “well to do students” at the University of Virginia at Charlottesville who are in a underserved tract but fall into the new FOM guidelines plus another group of Virginia Tech students who offer “high tech” potential. And there are other examples of CUs applying for underserved areas turning into lucrative FOM expansion. Turning to the big TRW-Western merger in California-of which his firm served as advisor-Carver said the consolidation is producing $5 million in savings by combining operations, cutting duplicate League expenses and eliminating branches among other reductions. During a Q&A session, Caver also urged CUs seeking community charters to drop single county or single sponsor nomenclature despite a long history and close identification. As an example, he acknowledged that Henry County Community CU in Indiana did the right thing when it became Eastern Indiana Federal CU when it decided to expand into a neighbor county. “Use generic names,” he urged to avoid confusion and in marketing emphasize words like “service, member, best and friendly.” -