The largest credit union merger announced to date has been called off.
In March, the $5.9 billion Suncoast Schools Federal Credit Union and GTE Federal Credit Union, with $1.9 billion in assets, announced plans to merge and create an $8 billion credit union.
The decision to call off the merger came as the two credit unions conducted due diligence and found that the disruption in operations caused by the merger outweighed the positive.
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"We knew that at the time we put everything together in due diligence that we would make our final determination. The interruption of the integration to employees and to the credit union was just too much," said Suncoast Schools President/CEO Tom Dorety.
GTE President/CEO Bucky Sebastian seconded Dorety's statement. "When we got down to looking at actual implementation, the integration was going to be extensively disruptive. There's a win at the end of the tunnel, but it got to the point where it wasn't worth the disruption."
Dorety said that over the course of the discussions the two credit unions had become close, and the decision to terminate the discussions was not an easy one.
"You have to take the emotion out of it though. No one was holding a gun to our heads saying that we had to do the merger," Dorety explained.
Both credit unions had seen significant rises in their delinquency rates in the second half of 2008 due to the Florida housing market collapse.
When merger talks began, both CEOs said that the economy was not behind their decision to merge, but with combined resources they'd have the opportunity for growth coming out of the recession.
Sebastian said that the decision not to merge doesn't change any strategic thinking or plans for the future because they were always prepared to do either and hadn't fully made the decision to merge yet.
"It doesn't change anything but the direction that we're looking now."
Dorety said that, still being a large credit union on its own, Suncoast Schools will see growth when things pick up and that calling off the merger hasn't had a lot of impact on that.
In terms of financial condition, Dorety said the credit union is bouncing along the bottom. "We've just had our best month and our best quarter, but that doesn't mean we're making money. We're not seeing the losses we were seeing before though; we're where we thought we would be at this point."
Between December 2007 and December 2008, Suncoast Schools' delinquency ratio had risen to 3.46%.
Sebastian said that GTE is seeing a slow recovery in its loans. As of December 2008, GTE had a 2.66% delinquency ratio. He said they're seeing an improvement of about five to 10 basis points a month, but it will take a year or two before they will get back to a ratio in the mid-ones.
"We're seeing little signs of progress," Sebastian said, citing an increase in home prices and sales in the Tampa area.
Sebastian said that the Tampa area had a 4% unemployment rate three years ago, and GTE was making loans to 96% of those working. Now, he said, there is a 10% unemployment rate and GTE is making loans to 90% of the workforce.
"Those 6% are the problem, but they're in our system and we're reaching out to them. We'll get back to where we were fairly quickly as long as the unemployment rate doesn't continue to go higher." But, with unemployment being a lagging indicator, Sebastian said that it will take some time.
"Things do appear to be getting better. It's a slow but steady progress. We're very bullish and optimistic about the future."
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