Successful Merger Strategies – Part I

The number of credit unions declines every quarter, primarily due to industry consolidation via mergers. There seems to be two different scenarios that act as catalyst for a merger. Often, a smaller credit union is constricted in its ability to offer a full range of services and products to its members, and seeks out a larger credit union with which a merger would develop more complete service for

The number of credit unions declines every quarter, primarily due to industry consolidation via mergers. There seems to be two different scenarios that act as catalyst for a merger. Often, a smaller credit union is constricted in its ability to offer a full range of services and products to its members, and seeks out a larger credit union with which a merger would develop more complete service for the smaller credit union’s members. In other instances, two credit unions of approximately equal size merge as a means of improving member value with improved efficiency and productivity economies of scale afford you.

On January 28th, Rich Helber, CFO of GTE Federal Credit Union, and John Bommarito, CEO of Western Federal Credit Union, shared their merger stories with interested credit union executives at a Callahan & Associates’ webinar event. Rich and John broughtdifferent experience to the table, as the merger scenarios they have encountered reflect the different catalyst scenarios described above.

Rich Helber explained that GTE’s growth strategy is focused on branch expansion, indirect lending and a deeper penetration of wallet share – mergers are viewed as a windfall. However, they have completed four mergers in the last eighteen months, allwith credit unions considerably smaller than the $1.6 billion institution.

GTE views a merger as a means of growing total membership and evaluates the opportunity in terms of member acquisition cost. If they can acquire members through a merger for less than the $100 per member rate they have determined it costs to acquire amember through marketing, then the merger has its merits and generally outweighs potential capital dilution problems.

While Rich recognizes that every situation is unique, GTE still has policies in place that have helped them become a viable option for so many credit unions in search of a merger partner. Some of these policies include:

  • Retain all employees one year
  • Employees keep salary but may be reassigned duties
  • Employees keep seniority (except in pension)
  • Keep existing facilities open as long as members support them

This approach has attracted GTE to many credit unions in search of a merger, and in the process as led to extremely high retention rates among those members acquired through this process.

In coming weeks look for Part II, summarizing Western Federal Credit Union’s success in merging two credit unions of equal size.


Would you like to hear these credit unions’ stories in their own words? It’s not too late. Pick up a copy of this webinar on CD-ROM at http://www.creditunions.com/store/webcast/Operations/merger.asp

April 26, 2016

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