WASHINGTON (5/27/14)--The National Credit Union Administration's Office of Small Credit Union Initiatives (OSCUI) released a new brochure to be used as a resource for credit unions considering a merger. Titled "Truth in Mergers: A Guide for Merging Credit Unions," it provides a framework for credit union managers to begin discussions about the future of their institution.
"Every strategic plan should include contingencies, including when a merger is worth considering," said OSCUI Director William Myers. "The critical first step is recognizing the early signs that a credit union's long-term viability may be at risk. A credit union still in sound financial condition has more options when it comes to merger partners and is in a better position to negotiate a contract than a credit union in a deteriorated financial condition."
Between 2003 and 2012 there were 2,462 mergers--an average of one every 1.5 days--according to the NCUA. NCUA also found that many credit unions wait until they are in a precarious financial position before exploring a merger as an option.
Many of these credit unions exhibit the following negative characteristics:
The brochure draws lessons from a review of more than 430 mergers that took place over an 18-month period. It is designed to help credit unions that might be considering a merger recognize when it might be in its best interest.
Once a credit union is in financial trouble, a merger becomes more difficult because there will be fewer potential partners, giving the troubled credit union less leverage in any negotiations. If a merger deadline is imposed by the NCUA, options can become increasingly limited.
The brochure identifies scenarios that can be harbingers that a credit union's viability is at risk. If a credit union recognizes any of these scenarios, it may want to explore merger options, the NCUA advises. Characteristics include:
It also contains information on how to find a partner, negotiate a merger contract that serves members as well as employees and finalize the transaction.
Use the resource link for more information.