PORTLAND, Ore. – In terms of assets, the potential merger of Portland Teachers CU and Oregon Community CU would barely cause a blip on the radar screen of bank mergers, but for the credit union industry this is as big as they come. With Portland Teachers having approximately $1.5 billion in assets and Oregon Community with almost $662 million, it would be the largest credit union merger ever and would put the merged CU in the elite class of multi-billion credit unions. The main message coming from the CEOs of both credit unions is that it is not a done deal, and the reason the news is already out there is the boards agreed to conduct the process in a public manner. "The reason we expressed an interest in merging is so that we can complete our due diligence out in the open. That's not the normal merger model. I've been through six bank mergers in my career and you can come in on a Monday and learn that there's a merger and everything is all done. Integrity is important to us. We need to involve our employees," said PTCU President/CEO Cliff Dias. Dias spent over 20 years in banking, his last job as head of retail banking in the state of Oregon for Security Pacific Bank, which by the way was merged away into Bank of America. Portland Teachers and Oregon Community are certainly healthy (9% and 8.3% capital respectively) and growing, so why merge? "It's an opportunity to grow much faster than we would if each of us remained independent. My personal view is it would take us five or 10 years to grow individually at the rate we will if we merge," said Dias. Dias said the Portland market is overrun with large bank competitors, and the extra girth would help the CU compete head on. "Though we're the largest credit union in Oregon and the second largest in the Northwest, five of the 15 largest banks have a major presence here. This would give us the chance to offer more products to compete," said Dias. If this deal does happen it would cap a lot of changes in recent times for Oregon Community CU. Oregon Community CU is the former U-Lane-O CU. It changed its name earlier this year after converting to a community charter that allows it to serve anyone living or working in 10 counties in Western Oregon. Though it is itching to go out and serve its new FOM, Oregon Community CU President/CEO Gordon Hoerauf, said it could do that a lot cheaper and faster with the merger, mainly because of PTCU's branch network in the Portland area. "Five of the 10 counties we gained in our community charter, are ones Portland Teachers already operates in. It could take us 10 years to get that kind of branch coverage in Portland. With our new charter we went from 150,000 potential members to like 1.9 million," said Hoerauf. That potential is great, he said, but brick and mortar is needed to sign on those potential members. Hoerauf said the CU planned on building branches in the Portland area three to five years down the road, but to reach the level of 10, which PTCU has, would have taken more than a decade to pull off. Hoerauf said Oregon Community has in a way been a victim of its own success. "We've done such a good job locally reaching out. We have great penetration in the Eugene-Springfield area that at some point you worry about hitting saturation," said Hoerauf. He said the CU has almost 44% penetration among Lane County residents. The CU's 10-county community gives it access to 70% of the state's population. Oregon Community was originally Lane FCU serving state employees in Lane County which included University of Oregon employees. It later changed its name to U-Lane-O to reflect the importance of that FOM. Hoerauf said one problem the CU has is keeping University of Oregon alumni as members. They sign up while at the university, but often close their accounts when they move away. Many times, said Hoerauf, they move to the Portland area because that's where the jobs are. "We probably have 40,000 potential alumni members in Portland. The way the board is looking at it is we would have an immediate presence to serve them," said Hoerauf. Hoerauf said the whole merger potential didn't come up until after the charter change. Dias was the initiator. Dias said he was given permission by his board to start merger discussions. Portland Teachers CU's FOM includes employees of schools and nonprofit educational organizations and their families in five Western Oregon counties. Even though Oregon Community can now serve members in all five of PTCU's counties, both CEOs say there is virtually no overlap between the CUs because Oregon Community hasn't even scratched the surface of reaching out to potential new members in the 10 counties. Dias however said PTCU is starting to see Oregon Community more in the Portland market, especially with Oregon Community joining Credit Union Direct Lending (CUDL). Hoerauf said Oregon Community is signing up 200 to 300 more members a month through CUDL. Portland Teachers is also a member of CUDL. With a merger of this size, one of the first questions is who would lead the new credit union. Neither Dias or Hoerauf have answers just yet. "It's all up in the air at this point, but I'm not doing this for me, I'm doing it for the members. I've been in credit unions for over 32 years, and looking back I don't want to do anything that doesn't benefit the members. If I end up as EVP or janitor, it doesn't matter as long as the members win," said Hoerauf. Both Dias and Hoerauf said at this point there are more questions than answers. Things like what the name would be, the makeup of the board, the executive moves, where it would be headquartered, and others will be hashed out in the discussion phase. Dias did say however that there would be no layoffs should the merger come to be. He also confirmed that each CU is on different data processing systems. Portland Teachers processes with XP Systems and Oregon Community with ULTRADATA. The credit unions have retained D.Hilton and Associates to facilitate merger discussions and to perform various research and analysis tasks. Former NCUA regulator and current credit union consultant Alan Carver has also been tapped to perform some analysis of the potential mergers. "It's important that people know we share the same values. We've both been named in the top 100 of the best companies to work for in Oregon," said Dias. [email protected]