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Maine CUs pursuing rare MOE

The credit union space continues to experience heavy merger activity, and although institutions trumpet the importance of scale, few of those deals involve like-sized companies.

Mergers of equals, such as the deal between California Credit Union and North Island Financial CU, have been the exception rather than the rule recently, but two Maine credit unions believe they can make it work.

Sanford, Maine-based York County FCU earlier this week agreed to a merger of equals with Brunswick-based Atlantic Regional FCU. The combined credit union will approach $670 million in assets and about 44,000 members. Atlantic Regional has $363 million in assets and more than 21,000 members, while York County has $303 million in assets and more than 23,000 members.

Atlantic President and CEO Roger Sirois said in an interview that the merger is still in the early stages but that the credit unions wanted to get the message out now so that members and employees were aware of it "before they heard it on the street" and to ensure that due diligence was handled properly. Atlantic has not been involved in a merger for about 35 years, and Scott Chretien, president and CEO of York, said that institution has not done a merger since 1993 when it was known as York County Teachers FCU.

He said one positive aspects of the merger is that there would be no overlap of branches or fields of membership. The new credit union would offer branches all over the coast of Maine and operate under the Atlantic Regional moniker. Chretien said the Atlantic name was chosen because it represents the resulting geographic footprint that would stretch from York, Maine, to Topsham, Maine.

Dennis Holthaus, who heads up Achieva Merger Services, a consulting group launched by Achieva CU, said there are several reasons why there are not more credit union mergers of equals, most of which revolve around emotional and cultural issues. Those typical stumbling blocks include who the surviving credit union will be, what it will be named, who will serve as CEO and what the composition of the board will look like.

Sirois said the new credit union's board would be composed of nine members, with four from Atlantic Regional, four from York County FCU and the final spot reserved for the CEO or another individual from York County. Sirois would become the new credit union's president and York County FCU's Chretien would be the CEO.

Sirois said both credit unions recognize the importance of scale and believe that in their case a merger would allow for cost savings in areas such as contracted services. Additionally, the new credit union would be able to provide its members with new products and services. For example, Atlantic has a commercial lending unit and York County does not, but York County offers a credit card program and Atlantic does not.

Holthaus said another common MOE roadblock is how staffing adjustments will be handled. "How many times have you seen a press release when two credit unions merge that says the resulting institution will have no staff, of either institution, lose their job?" he said. "The question I would ask in this scenario is whether or not the merger is in the best financial interest of the members when the financial strategy of merging does not take advantage of the economies of scale that result from the merger."

Chretien said he and Sirois believe that the larger credit union, with a continued growth plan, will have even greater staffing needs.

Another reason for for the lack of MOEs, Holthaus said, is that credit unions above a certain size are doing well on their own and thus are not interested in a merger unless they will be the surviving institution.

Sirois said that is not the case in the Maine merger. Both companies also have similar philosophies in dealing with staff and how they take care of their memberships, he said.

In terms of competition, Sirois said it now comes primarily from community banks, and that likely will not change after the merger. He said the community banks in Atlantic's markets tend to be much larger than it is, but the merger will get Atlantic a little closer to them in asset size.