In the past, the CFO focused solely on financials during mergers. That’s no longer the case.
CFOs today are expected to take a leadership role in the merging institutions’ cultural transformation, including educating staff and modeling behavior. This requires solid people skills, according to “The CFO’s Emerging Merger Role,” a white paper from the CUNA CFO Council.
During the merger process, the CFO must communicate with small and large groups about specifics. This makes it important for the CFO to develop and cultivate relationships.
They also must watch for red flags raised during due diligence, says Scott Waite, senior vice president/CFO for $3.6 billion asset Patelco Credit Union in Pleasanton, Calif.
“Looking at certain ratios will tell you whether it is even worth taking it to the next level,” he says. “By examining these ratios you’ll be able to see if the acquired credit union is holding, losing, or gaining ground.”
Important measures to consider, Waite says, include loan performance over time, the movement of the charge-off ratio (whether it’s increasing or decreasing, or lower or higher than the market rate), current delinquencies, net interest margin, yield on assets, cost of funds, operating expenses to average assets, and net worth.
The CFO will need to assess the one-time costs and the effect of earnings depletion now and down the road to determine the benefit of merging.
Other merger-related concerns to address:
Credit unions must recognize that the combined balance sheets will be a driver for the new organization for a long time. Mergers can be successful if they reduce cost—and that usually means reducing staff.