Mergers: A Page from History vs. Becoming History, and More

There was another turning of the page in the Official Book of Credit Union History recently with news that the Michigan Association of Credit Unions (MACU) will be absorbed via merger by the Michigan Credit Union League.

Many may not be aware of it but there was a day when a number of states had rival credit union associations, divided by affiliation and non-affiliation with CUNA. For decades, Massachusetts, for instance, had a "league" that was actually the non-CUNA affiliate, before the two groups in that state also merged.

Michigan, like other states that were once home to a factory's worth of manufacturing plants, heavy industry and all the supporting companies, had so many credit unions that not only could more than one association be supported, but other groups sprung up to serve similar FOMs, such as the Council of Automotive CUs. Back in the day all those groups also meant that while the pay wasn't that good for CU managers, there was an additional weekend per year at a resort for the annual meeting.

But as Credit Union Journal reported in detail in the Feb. 22 issue, the name on the side of many of those factories has faded, the parking lot has long been guarded by a rusted fence, and the key to the padlock on that fence disappeared a long while back with someone's retirement. The words "Employees Credit Union" that used to follow the respective manufacturers' names have disappeared as CUs merged, moved to community charters, and opted for new industry- and geography-neutral names that were chosen so as to never again be linked to a company or even a town.

In 2009 MACU and the MCUL entered into a two-year agreement under which the league provided some services to the smaller association. Midway through the deal, it was decided MACU would officially disband, and its 18 CU members are now part of the league.

"Consolidation in our industry continues to challenge associations nationwide, and that is why the MCUL and MACU alliance was formed-to provide a single voice for all Michigan credit unions with one strong trade association," said MCUL CEO David Adams in the press release announcing the deal. The league will now represent 335 CUs in Michigan.

• The mergers among associations, of course, reflect the mergers among natural-person credit unions themselves. While many have been voluntary as CUs search for those elusive efficiencies of scale, many others have been arranged marriages, with state and federal regulators looking to find partners for troubled or failed institutions.

The latter offers a chance for quick asset growth, perhaps a new branch office or two or an expanded FOM. But such mergers also bring risks; unseen and even hidden risks according to some CEOs with whom Credit Union Journal has spoken over the past few months.

A number of CEOs, many asking to share comments anonymously, stressed it is incumbent upon managers and boards considering a merger to do their due diligence and to not take regulators at their word when it comes to the balance sheet of another CU-especially one already in conservatorship. One CEO told a Journal reporter of a friend of his who thought he was "getting a peach" in a merger partner that in fact turned out to be a "pig."

Indeed, it seems that "lipstick on a pig" quote is the metaphor du jour right now for many.

One CEO added that just because the examiner knows where the skeletons are in the closet, it doesn't mean he or she will point them out.

Another lamented that many small CUs are hemorrhaging losses due to reserve calls and there is no end in sight for many. That leads to hurried mergers and often an eventual realization that "now we're losing money together."

Perhaps not surprisingly, in nearly every case the CEOs said they wanted NCUA to take more of the risk in such mergers.

• For a view outside the industry, a Credit Union Journal reader who recently attended an Urban Land Institute meeting in San Francisco shared these insights from the event:

  • "The Internet has completely changed unemployment trends. Instead of just pumping up the U.S. economy and bringing back production jobs, the Internet has caused the entire world to be competitors for many jobs in the US...It likely means wages in the US will be reduced below where they might have been."
  • "Mobile phones, and other devices are now becoming all sorts of tools and multiple-use devices. Social networking is growing faster than anything anyone can imagine. This is where everything in the world is going, from ordering food or reserving a car on Zip Car to reading the news. If you are over 30 you can't grasp what is happening and how fast...You need to learn all about this or get run over."

• From the CU Police Blotter:

  • In Los Angeles, a credit union branch directly across the street from the new Los Angeles Police Department HQ was robbed.
  • In Haverhill, Mass., a 19-year-old CU teller was charged with stealing more than $20,000 from an elderly couple's account and using the money for a trip to Amsterdam. The local Eagle-Tribune reported that the couple's children became suspicious when $1,000 was withdrawn from the account the day after the man died.
  • In Biloxi, Miss., three people were arrested after police say they broke into a deaf man's house, then forced him at gunpoint to go to the credit union to withdraw money. Police said the victim was able to alert an employee who knew sign language.

Frank J. Diekmann is publisher of Credit Union Journal and can be reached at fdiekmann@cujournal.com.