Credit unions are dying at the rate of almost 20 per month. Rosa and I witnessed the death of one of our small, local credit unions two weeks ago when we attended a special membership meeting to vote up or down on a voluntary merger with another local credit union that was ten times larger.
Voluntary mergers are common
Mergers of this type are not unusual. In recent years, credit unions have been disappearing through mergers at an average rate of 229 per year nationwide. Ninety percent of these mergers involve small credit unions ($50 million in assets or less) joining with larger credit unions to provide their members with products and services the smaller credit unions could not afford to provide on their own. Additional services and the convenience of additional branches were cited as reasons for the merger in the meeting notification letter Rosa and I received.
We opposed the merger
We were against the merger and intended to vote that way at the meeting. The merger offered no advantage to us: we already had access to the services and additional branches as members of the larger credit union into which the smaller one was to merge, and we stood to lose several advantages the smaller credit union provided such as higher interest rates on certificates of deposit, dividends paid monthly rather than quarterly, and the opportunity to adjust the interest rate once during the term of a certificate of deposit if interest rates increased during that time. In our view, members of the smaller credit union who wanted more services and branches could join the larger credit union; membership in that credit union is open to all who live within the county.
Our minds are changed at the special membership meeting
The chief executive officer (CEO) of the credit union welcomed those who attended the meeting and explained the process by which the board of directors had arrived at the decision to merge with the larger local credit union. He noted that the credit union was in sound financial condition. It was a desire by the chief executive officer and chief operations officer to retire within the next couple of years after serving in their positions for 43 and 37 years respectively that had prompted an investigation into the options open to the credit union. No plans had been made for the succession of top management, and there was not enough time now to bring in new management and adequately train them to take over the operation of the credit union, a process that the CEO estimated would take five years. Other options were considered to keep the credit union independent, but a decreasing and aging membership along with a shrinking loan portfolio made them unfeasible. A merger appeared to be the best solution and the best candidate for merger was the larger local credit union.
According to the National Credit Union Administration, 47% of recent credit union mergers cited declining membership as the primary reason for merging with a larger credit union, while poor management succession planning was the primary reason for 18% of mergers.
The CEO’s presentation changed our minds. We now understood the real reasons for the merger; a vote in favor of the merger appeared to be the only rational choice. The credit union would need to merge eventually; nothing was to be gained by postponing it.
After being assured that the terms of our current certificates of deposit would be honored by the larger credit union, we cast our votes in favor of the merger. The results were announced shortly thereafter. Out of 5,000 members, a little over 500 actually cast votes, most of which were submitted by mail prior to the meeting. Roughly 70% voted in favor of the merger. As of June 1, 2015 the credit union will cease to exist.
Fewer credit unions equal less competition, fewer choices, less freedom
The passing of this credit union means less competition in the local market and the further erosion of personal service in the financial services industry. The management and staff of the deceased credit union were on a first-name basis with a large percentage of their membership and had developed personal relationships with their members over the years. The word “family” was used many times during the special membership meeting. That will not be the case at the larger credit union which is moving relentlessly to automate as many services as possible. We already have credit unions in our local market that utilize centralized teller services for their branches. Much like a call center, tellers are located at a remote office and interact with members at the various branches via a video terminal. Another credit union has gone completely electronic and charges members a five dollar fee for each transaction conducted face-to-face with a teller; all business with the credit union is done remotely via the internet or call center personnel.
With the death of each credit union, the consumer is left with fewer choices and less freedom.
K. C. Knouse is the author of True Prosperity: Your Guide to a Cash-Based Lifestyle, Double-Dome Publications, 224 pages