This post is going to be a bit outside my usual branding/strategy fare, and I’m not usually one to throw any muck, but I just have to add some commentary on this matter. The unspeakable is happening in my backyard. KV Federal Credit Union ($51 million in assets) has decided to convert to a mutual savings bank in order to promptly merge with Kennebec Savings bank (a $650 million bank).
I was at the Maine Credit Union League in Portland for an orientation program when the news broke Tuesday morning. Needless to say the room immediately exploded in conversation.
Now, I’ve seen a few credit union to mutual savings bank conversions go down here on the intertubes, but never thought it would happen right next door. I’m not positive, but I think this might be the first cu to bank conversion that is being done for the sole purpose of merging with another, larger bank. To me, that is even more disturbing than a strait up conversion in my mind.
Now, there are always two sides to a story, so I’m sure my bias towards the base philosophy of credit unions will show, but I’m not here to report objective news.
KV Federal Credit Union has said, in response to questions about why they are merging with a bank, “The merger would allow the two institutions to become more efficient and position themselves for growth in a crowded banking market.”
I’m not sure what their continuing plan is, should this merger actually happen, but it is my opinion that to merge for the sole purpose of growing is one of the worst ideas ever. If your current growth plan is not building your member or customer base, how is a merger going to do anything but create an artificial jump in customers/assets? Not to mention that even though they refer to KVFCU and KSB as “two institutions”, once the merger is completed, the only institution positioned for growth is the bank.
To me, that goes against everything a credit union should stand for. The members would lose their say in the running of the institution, and their ownership. They lose their credit union, and as one member put it in a comment on a Kennebec Journal article, “I know I plan to tell them I will also close my accounts if KV Fed and Kennebec Savings merge-I joined a CU for a reason.”
I think many credit union members feel the same way.
I hope that the membership of KVFCU votes against this conversion. These members have built and owned the credit union for years and if the conversion goes through the only thing that will remain will be their account numbers.
That said, if the membership doesn’t vote this down, I feel that we should let the conversion take place. The board and management have shown that they don’t particularly care for the philosophy of the credit union movement. Those members who don’t care about the difference between being a member/owner and a customer will follow KV to Kennebec savings. Those that are a member because they know what it means and enjoy the benefits of being a member/owner will hopefully find a credit union who’s philosophy and vision fits their own.
What are your thoughts on this conversion?
13 comments:
There's always two reasons..."the good reason" and the *REAL* reason. I think they aren't telling us the real reasons for this merger, because "the good reason" (increased efficiency) doesn't seem adequate.
I think you should send this to the Morning Sentinel and the Kennebec Journal. I don't know if your read Thursdays article, but the ceo is making the maine credit union league look bad to those who do not understand what a credit union stands for. It is so madening.
http://morningsentinel.mainetoday.com/news/local/5399424.html Here is the link to the article. My name is Kim from Winslow Community FCU. Love your blog.
This fight will be more likely to go in the league's favor if members of KV are seen as leading the charge.
Andy, I read a news report on this yesterday and was going to email you to get your reaction. I'm glad to have an opportunity to respond to your post. These CU + Bank mergers are of tremendous interest to me as a credit union board member. I always wonder what I would do if faced with a similar movement on the part of management. This one is of particular interest because of the size of KV Federal (50 mil). UFirst is similar in asset size. I hate to be cynical but wonder if this merger in any way benefits management or the board. It's interesting to me that in the article that Kim cited there is no mention of NCUA. Don't they have to be involved in this type of merger?
I want to ask a slight tangential question in relation to this news.
As a CU president/employee would you rather the CU die or merge w/ a bank?
@jeffry
You're completely right, I'm sure there is something here we're not seeing or not being told. We may never know exactly what that is and I'm not sure it really even matters.
I also agree with you that the only real way that this can come out well on either side is to let the members of KVFCU carry the flag if they want to stay a credit union. Nothing I say or really, anybody else, except the membership can do anything about this without incurring some collateral damage.
@Kim Thanks for commenting, glad you enjoy the blog. I'm glad your joining the discussion as a fellow Maine CUer.
I don't know that sending this to the Sentinel or KJ would do anything other than to exacerbate current hostilities.
Though I hate to see somebody speak lowly of the Maine CU League, this is really between KVFCU and them and I am merely a third party expressing my view.
Hopefully the members of KVFCU will speak up, it is their credit union, and whatever the outcome of a vote is, that's what the credit union should do. I just really hope they get involved. The only way this is going to turn out well for either party is if the membership stands up for their credit union and the League.
Arguments between KVFCU, the Maine CUL, and any other party would just make everybody look bad in the end.
@ginny
Its definitely an intriguing topic. I'm sure its a very tough decision to make when it comes down to it.
I also have heard nothing of NCUA's involvement in this. None of the articles I've read from both local papers and trade publications have not mentioned anything about NCUA that I've seen.
@Brad
Brad, bringin' it with the tough questions. I like it.
If the option for a merger with an existing credit union in the area wasn't an option I would fight the bitter fight to the end personally. Maybe I'm just stubborn though.
Once again though, I feel like it really needs to land with the membership as to what to do if the CU were failing. What would they rather do, close down and move on to another institution or merge with a bank?
This brings up a whole mess of things though. Would people rather move to a different CU and get to know new staff, etc. or would they rather merge with a bank in order to at least preserve the branch location and its staff that they are familiar with even though the credit union itself is no more?
Inquiring minds want to know if KVFCU considered or asked to merge with another credit union first.
Christian Mullins has also blogged about this merger here:
http://christianmullins.wordpress.com/2008/09/16/credit-union-plans-to-merge-into-bank/
-Morriss Partee
As far as I know Morriss, 2 of 4 potential credit union merger options were never consulted. Here's an article about it http://cutimes.com/article.php?article=40433 which actually quotes Maine State CU's President, Normand Dubreuil.
We had a member come in to our Credit Union today. He is moving everything from KVFCU to us. He has wrote a letter to the board of directors expressing his strong opinion about the merger. He is thinking about sending the letter to the reporter who has been covering all of this in the morning sentinel and kennebec journal.
I have opened two accounts today myself bringing in a little over $100,000 in deposits. These new members were uncomfortable keeping their money in a bank with all the
bank/investment co. shut downs and mergers.
I was very concerned about the KVFCU merger at first, due to the fact that some members might be dazzeled with "cool new products" a bank might have to offer, and not being completely aware of the more discrete benefits the credit union has to offer.
These mergers and shut downs are very disturbing and scarey signs of our economy. As horrible as everthing is, it is nice that some are leaning to Credit Unions as a safety net.
~Kim
At the very least the members of KV deserve to know if (read "how much") management and members of the board stand to gain financially in this deal.
If the CEO was willing to continue with the surviving bank at her current salary and the directors were still willing to volunteer their time, then perhaps their claims of merger benefits deserve consideration by the members. If they won't provide full disclosure of their financial interest the members should recall the board.
The members would be better off to liquidate the credit union than merge with a bank.
Follow the money....
You have to remember this when asking the question "merge or die":
KVFCU is not in a "die" position! They are a healthy credit union with nearly a 10% capital ratio and a 0.86% ROA...some CU's would kill for an 86 ROA in this market! They have great asset quality with a delinquency ratio of only 0.11%! No wonder the bank is licking its chops to get at the $5 Million in capital! The biggest thing is that no money changes hands...its FREE CAPITAL to the BANK!
The problem for KVFCU is the lack of a succession plan...the CEO is near retirement age with no successor. The board is probably equally (if not more) advanced in age and doesn't have the desire to continue serving. So, why not make some money on the deal, right?
I agree that the Board should be recalled and the CEO should be fired. It is a disgrace to the CU movement and nothing but greed could be behind such a bullshit move!
Wow, somebody's getting a little saucy with the language.
Yeah, this is strange. Can the member still vote the motion down? Their website seems to suggest this will have to do with member preference...
Credit union members should still be able to vote the motion down. I'd consider contacting the credit union president.
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