Are credit union mergers keeping bankers up at night? Some reports point to banks becoming increasingly jittery about credit union mergers, concerned that some credit unions may become “too big for their britches” and pose a real threat.
In a recent Washington Business Journal article, the merger occurring with two of Maryland’s largest credit unions MECU ($1.1 billion, Baltimore, MD) and SECU Credit Union ($2.4 billion, Linthicum, MD) has banks wringing their hands, concerned that some credit unions are becoming too large.
SECU’s CEO Rod Staatz says he isn’t sure what could possibly be behind banks’ concern with his merger as SECU plans to merge with Anne Arundel County Employees’ Federal Credit Union ($82.4 million, Annapolis, MD) sometime this year.
“I can’t really speak to why banks may or may not be concerned with mergers happening in the credit union industry right now, but I can say we have seen an overwhelmingly positive response from members within Anne Arundel Employees’ Federal Credit Union and SECU, specifically, regarding our proposed merger,” Staatz explains.
He adds that concerned banks should consider that on a national level, credit unions make up approximately only 8% of market share versus banks. “Our main focus has always been, first and foremost, that we are acting in the best interests of our member base, and that we truly behave and perform as consumer advocates for them,” Staatz exerts. “Our motivations are different than that of banks. Our business model is predicated on serving members, not the profit margin. And since we continue to grow, we must be doing something right.”
However Kathleen Murphy, CEO of the Maryland Bankers Association says that credit unions aren’t playing fair when they expand beyond their original roots. Expansion in this fashion should mean that credit unions be stripped of their tax exempt status and the credit union should convert to a bank.
“The more they expand and act like Federal Deposit Insurance Corp.-insured banks, they should convert to banks,” she said.
John Worth, NCUA chief economist explains that credit unions have been playing by the rules and facing assessments in order to insure depositors’ accounts. Worth says that the credit union insurance fund reached $3.3 billion in assessments over the past few years to maintain fund safety.
“You have to scratch your head to try to figure out what could possibly be the real reason why banks could have an issue with credit union mergers,” says Daniel Adams, President/CEO of Bellwood Federal Credit Union ($55 million, Richmond, VA). “Bottom line, as long as credit unions exist, whether small, medium or large, bankers don’t like it.”
“Competitively we are not going to make a dent against banks like Wells Fargo,” Adams continues. “It seems to be an issue that helps them to continue with their organizations. It’s like political football, however credit unions continue to remain focused on what’s most important--the membership.”
Credit Unions More Focused on Improving Member Services
Staatz says that he is more fixated on being able to deliver a wider menu of services to Anne Arundel’s membership base. “Anne Arundel’s member base had expressed to their Board of Directors they wanted to have the additional, expanded service they were not currently getting. Anne Arundel, as it exists today, has neither the financial nor the human resources to provide these services their member base wanted, and the services that, frankly, are necessary to stay viable over the next few years. Merging with SECU ensures that their member base will get the services they want and expect, with an organization that shares the same values and belief system they do.”
“The way people bank is far different than it was ten years ago, and Anne Arundel’s members were looking to benefit from these changes, and with new technology, like expanded electronic services including mobile banking and remote deposit capture, as well as more residential mortgage options, home equity lines of credit, and better pricing options for their core checking and savings relationships,” Staatz says. “Additionally, the merger provides greater branch convenience now with four branches located in Anne Arundel County, 15 additional SECU branches in the surrounding counties, and the introduction of Saturday and expanded weekday hours.”
Adams says that his merger will provide benefits for both employees and the membership. “We wouldn’t have even considered a merger if it did not provide benefits for both our members and employees. Henrico Federal Credit Union ($120 million, Richmond, VA) is larger and can offer more variety and services, better interest rates and a better position for rates. From an employee standpoint, we look at it as a good fit because we had some vacancies and so they did too--they merger allows the credit union to cross fill between departments.”
Credit Union Mergers Are Member Based-Not Stocked Holder Based
“The primary consideration is always if the merger is right for the member,” Staatz discusses. “Does it benefit them, and is it in the best interests of both member-bases. In the case of our merger with Anne Arundel, we asked two simple questions: Is this right for Anne Arundel’s members, and is this right for SECU members?”
Staatz says that ultimately, it is the members who decide whether they want to merge or not. “The members of both organizations have to vote in favor of a planned merger in order to move it forward. In our case, I’m excited to say that the Anne Arundel members have seen the value this brings to them, and have subsequently voted in favor of it.”
“SECU benefits with the addition of two additional branches and approximately 14,000 new members, and we anticipate being able to serve them in a more expanded capacity with those additional services not currently available through Anne Arundel,” Staatz says. The merger, pending member approval, is scheduled to be finalized in August, and SECU will be the continuing credit union once it is approved.