Consolidation is New Reality, Says Peppers

DENVER – Consolidation, mergers and partnerships are now a way of life in Colorado and elsewhere and the trend can only increase given heightened competition from banks and nonbanks, according to C. Alan Peppers, president/CEO of the newly-merged Westerra CU of Denver. In comments last week following the selection of a new name for the former DPS CU, Peppers said market realities underscore the notion that size, technology and manpower skills now make the difference in a CU’s ability to compete. That’s particularly the case in Colorado, which he said now has the largest number of per capita retail branches in the U.S. At the same time, Colorado has also witnessed an invasion of very powerful regional and national banks in recent years. As for CUs, being large in size permits a CU like Westerra to acquire higher levels of technology sophistication as it meets the high expectation of members. That expectation, he said, occurs as CUs face competition from the likes of Wells Fargo, Key Bank, Washington Mutual and more recently, JPMorgan/Chase. This all comes at a time when CU asset and member growth have been flat in Colorado and below the rest of the nation, said Peppers. Asset growth increased 2.7% in 2005, down from the national average of 4.9% and member growth was at 0.3% against 1.1% nationally. Citing other state statistics, he said ROA last year stood at .57% as compared to .85% nationally. ROA in Colorado has dropped the last four years from .98% in 2002, .71% in 2003, .62% in 2004 and .57% in 2005. Meanwhile, the number of bankruptcies per 1,000 members stood at 7.66 last year against 4.05 nationally. “There is fierce competition for deposits and a flat yield curve, which means narrower margins for credit unions,” observed Peppers. “Being larger provides the better technologies – the road blocks for success are larger when you’re a mid-size credit union,” he said. “At a larger size, those same road blocks seem smaller.” Once a proposed merger of the $71 million Gateway CU is complete later this spring, Westerra will have 76,000 members, $910 million in assets and be Colorado’s third largest CU. -