Joining Forces From Positions Of Strength

A three-way merger results in a new institution that all three cooperatives will help create.
Drew Grossman

Strong apart, stronger together is the motto of the new CitizensFirst Credit Union ($581.6M, $402.2M pre-merger, Oshkosh, WI), which just completed a three-way merger in May with Best Advantage ($70.9M, Brillion, WI) and Lakeview ($110.1M, Neenah, WI) credit unions. Together, the trio will form an entirely new credit union with a different name and brand. (Update: In March 2015, the credit union rebranded asVerve, A Credit Union.)

Unlike other institutions that merge out of necessity and often from a position of weakness, this was a merger of choice and a truly collaborative effort. Although CitizensFirst was the largest of the three institutions, all were healthy. Lakeview and Best Advantage each had more than $70 million in assets and brought to the merger 8,500 and 7,700 members, respectively. Yet, they all joined forces because of the advantages such a union would provide.

Small size is often an impediment for credit unions, especially in an industry where large institutions keep getting bigger while smaller ones struggle to grow at all. By joining forces, the trio invented a different kind of merger, one that offers a path for smaller credit unions who want the benefits of such a deal without being taken over. The former CEOs of Lakeview and Best Adantage have just a much of a say in the direction of the new credit union as CitizensFirst CEO Kevin Ralofsky.

The three CEOs met six years ago, when Ralofsky headed VacationLand Federal Credit Union ($165.8, Sandusky, OH). At the time, all three CEOs met regularly because their institutions shared a core provider. So when Ralofsky moved to CitizensFirst, his good friend Tammy Williams at Best Advantage was happy to show him around Wisconsin. That friendship led to talks about strategy and eventually plans for a three-way merger took shape. spoke with Ralofsky about how the three credit unions will come together to form a new unified institution that all have helped create. His responses have been edited for brevity and clarity.

How did talk of a merger begin?

Kevin Ralofsky: As soon as I had the opportunity, this was July of 2012, I called up Tammy Williams (former CEO of Best Advantage) because I didn’t know anyone here and wanted to learn about the communities around us. I thought it would be good for us to collaborate a little. Tammy’s well respected in the Fox Valley. She’d been at Best Advantage for 17 years where she did a phenomenal job. We shared a lot of the same ideas and the same angst about the obstacles credit unions have been facing over the past several years.

Tammy thought to bring in Lakeview because it would be a great partner geography-wise as well as a good fit culturally. We both knew and respected Pat Lowney (former CEO of Lakeview). We all got together and started talking. That’s how it started. We didn’t get together to merge; we got together to collaborate and talk about how we were leading our organizations.

The angst you shared with Tammy Williams, what was that about?

KR: The increasing regulatory environment and issues related to that. Typically, when CEOs, get together, they just complain about that stuff, but we were trying to solve the problems. So the regulatory environment was one issue, and the whole trend of large credit unions getting much larger and the smaller ones becoming more irrelevant, that was another. How do we capture an important market or niche? We all believe that culture drives everything in an organization, and that led us to working together.

Had any of the institutions hit a wall with growth, lending, or service and saw the merger as a way around that problem?

KR: We all had specific needs. CitizensFirst needed to break into new markets, which Best Advantage could help with. I respected the heck out of Tammy and Pat and their leadership styles. If they’re leading, then I know they have good people on board. So the new credit union would have much more depth. Lakeview was at their cap for business lending; Best Advantage wasn’t even in business lending, although they were looking to serve that segment of their membership; and CitizensFirst didn’t have a business lending cap.

We also saw opportunities in combining our cultures, which were a good fit. If we pulled these three organizations together, think of the opportunities that would provide for membership and growth. After talking about it a lot, we decided this was a merger of choice, not of necessity, and we chose our partners carefully.

How did you merge the executive teams?

KR: Tammy and Pat are on the executive team. With some of the other executives, we created new verticals to focus on the new credit union’s cultural integration and growth. We created a new talent management team that oversees not just HR but also learning and development. We have dedicated project management positions staffed by high-level executives with many years of experience who know all facets of their organizations and how they run.

We compared full-time equivalents before and after the merger and we had three fewer full-time employees after the merger. Some employees opted out; others found new positions. When we had an opportunity to rehire someone, we rehired with the organization’s future structure in mind and as it would be post merger. Six months before the merger, we were acting as one organization, and certain team members held dual roles or other roles at one of the other credit unions. So there was a high level of collaboration even before we officially merged.

How did the merger affect branch staff?

KR: There were no branch closures, but everybody was affected in some fashion. We put together 15 cross-functional teams with representation from every credit union. Three project managers, one from each credit union, managed the cross-functional teams so that all of the projects could be managed together. We looked at every single one of our processes and compared them with what we had in place before choosing the best one or creating a hybrid, which is what we did in most cases.

Even though CitizensFirst was the largest of the three credit unions before the merger, we did not assume that the default for any process was going to be what CitizensFirst had been doing. So, for example, CitizensFirst didn’t have centralized underwriting before the merger whereas the others did. We adopted their centralized underwriting philosophy and are in the process of training our branch staff over the next several months. On the transaction side, we all had a similar way of doing business where there wasn’t a traditional teller line, so there was no change there, even from our members’ perspective. Our branch structures also were similar enough so that any changes were subtle.

How long does it take for the dust to settle after a merger?

KR: It is a challenge because we are running three different core systems right now. We won’t be on the same core until March 2015. We basically have one financial accounting team managing three different general ledger accounts. Most of the issues will subside once we’re on the same core system and working with a merged balance sheet. Until then, we won’t see the benefit of the new processes or any efficiency they’re expected to produce.

We didn’t choose to do the typical merger model where the whole back office is cut because we had duplicated efforts. Instead, we chose to beef up our expertise for project management, marketing, governmental affairs, or talent management in ways that will allow us to grow.

Tell me about the new brand.

KR: We will undergo a whole rebranding. The CitizensFirst name will change to still-to-be-determined name. That was part of the agreement; the brand needs to be something we all believe in. The name will change to show that this is truly a collaboration and not just a merger. Because it’s a collaborative effort, it changes the way you think about how you run your business and forces everyone to leave their egos at the door. Now, when we have meetings, we talk about what’s best for the member and what’s best for the organization instead of protecting each of our interests in a merger.

-As told to Drew Grossman

September 1, 2014

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