LAS VEGAS–The best practice employed during a 2010 merger of $177.4-million Metro 1 CU into $1.6-billion Travis CU, Vacaville, Calif., was “communication, communication, communication.”

That was the message from Barry Nelson, SVP and COO with Travis CU, who told attendees of the CUNA Operations, Sales & Service Council conference here that Travis CU had people in Metro 1’s offices every day while the merger was coming together to make certain everything went smoothly.

“Our bid was accepted Nov. 10, 2010 with a merger date of Dec. 31,” he recalled. “We explained the merger to Metro 1 employees as a group on Dec. 8, and over that next week we met with all of the employees individually by Dec. 15.”

Nelson said prior to the unassisted merger Travis CU has 158,000 members to Metro’s 17,000; Travis had 10.1% net worth, Metro 3.3%; Travis 20 branches, Metro five.

“Combined we made the 13th-largest credit union in the state by assets, serving 178,000 members, with more branches than either had on its own,” he said. “We had more services available to the combined membership, and efficiencies meant competitive fees, rates and programs.”

The two CUs issued a combined Call Report as of Dec. 31, 2010, but it took until May 1, 2011 to fully integrate all systems, Nelson reported.


Start With 'Why?’

According to Nelson, a merger starts with asking, “Why pursue a merger?” Other important questions include: “Will we be stronger together?” “Will we gain efficiencies and grow market share?” “Is a merger in the best interests of both memberships?” “Does the current math indicate value?” “If the math lines up, could both cultures align?” “What is negotiable and what is not?” “What might not get done as the merger becomes the focus?”

“It was clear our missions overlapped, and we had similar fields of membership,” Nelson said. “The two credit unions had strengths in different adjoining counties. Both were active in financial literacy and advocacy, as well as community involvement. And both of us used the Summit core system.”

Other pre-merger due diligence included a review of both credit portfolios, including an examination to determaine Metro 1’s loan reserves using Travis CU’s methodology. Another key question was if combining assets and liabilities would bump into commercial lending limits.

“We looked at what costs would be eliminated over time, do we need all their branches, and what would the impact be on human capital,” Nelson said.

One factor that made Metro 1 an attractive merger prospect from Travis CU’s perspective is the latter had penetration into only 1.7% of households in Contra Costa County pre-merger. Nearly two years after the merger, Nelson said Contra Costa County operations have generated positive earnings after previously being negative. Its market share in Contra Costa County has grown to 4.2% of households.

“Are we there yet? No, we still want to increase the average services per member and average deposit balance for our members in Contra Costa County,” he said.

Five Metro 1 branches plus 20 Travis CU ended up being 22 after consolidation, Nelson continued. He said data helped management make decisions about which branches to close.

“We decided the best time for closure would be at the time of merger, not months down the road,” he explained.


Finding New Places

In some cases employees did not have a place in the combined CU in their current role, so Nelson said they were encouraged to apply for different positions. Training on culture and systems began on Saturdays two months prior to core conversion. Merger packets were prepared for and mailed to members, and the packets were available inside every branch.

“For each branch we mixed Travis and Metro 1 personnel,” he said. “We wanted a little bit of both because the people make the credit union.”

During the process of the merger, management closed three branches based on overlapping circles–two Metro branches and one TCU branch. Nelson said the credit union gained efficiencies where two had same vendor relationships, and it cancelled some contracts that were not needed.

“Payroll decreased significantly post-merger,” he said. “Each employee listed current and previous jobs, because we did not want to assume their current job was all they knew how to do. Approximately 20 people left, and all of them got severance packages. Metro had already slimmed down from 100 employees to 50 in an attempt to survive.”

About the only problem was a “hiccup” on merger weekend that involved data. Nelson said in retrospect Travis CU should have had Metro purge its data on its system earlier.

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