Community development financial institutions have more protection against market pressure to merge.
All credit unions compete in the same general marketplace and face most of the same challenges. Some CUs—community development financial institutions and those that are low-income designated—have more protection against loss of net worth.
“As a CDFI, we have a lot of access to secondary capital,” observes Randy Chambers, president of $1.4 billion Self-Help Credit Union, Durham, North Carolina. “That lets us ride out some of the bumps in the economic cycles.”
It also helps that the Emergency Capital Investment Program, part of legislation passed by U.S. Congress in December 2020, includes $9 billion of capital for CDFIs and minority-owned financial institutions, skewed to help smaller FIs. Self-Help’s two credit unions should receive in excess of $430 million.
That puts Self-Help CU, which operates both a state-chartered and a $1.8 billion federally chartered credit union, in the position of being safe from needing to be acquired. And it is able to take in other CUs that see merger as a way out of the financial squeeze. In the past five years, Self-Help’s credit unions have merged in five other CUs and acquired the deposits and customers of one failed bank, Chambers reports.
As a merger partner, Self-Help CU welcomes the new members, along with the deposits, capital and assets. Meager net worth, he says, “is not a deal killer.” Self-Help CU has only turned down a merger opportunity once, he says, with a CU that didn’t fit with its CDFI mission.
Accommodating the CEO and board members is rarely an obstacle these days, Chambers notes. “Most CEOs are happy to lose the stress, to retire or become a regional head of something. We offer a merged CU the chance to choose one board member, but they often decline or participate for a year or two before letting it lapse.”
The front-line staff of a Self Help-acquired CU usually make out well. “We raised our minimum wage to $15 an hour in 2013,” Chambers reports. “Now it’s $18 an hour to $20 an hour, depending on geography.” But the Great Resignation is still an issue. “In the past two weeks,” he said in February, “we’ve lost senior people and MSRs who are taking other job offers.”cues icon
Richard H. Gamble writes from Grand Junction, Colorado.