A Merger Made For Members

CU QUICK FACTS

Gas Electric Credit Union
Data as of 12.31.16

HQ: Rock Island, IL
ASSETS: $71.3M
MEMBERS: 5,169
BRANCHES: 2
12-MO SHARE GROWTH: 0.02%
12-MO LOAN GROWTH: 3.1%
ROA: 0.60%

That was in 2013. In 2015, the credit union, which served the local Army Corps of Engineers, merged into Gas Electric Credit Union($71.3M, Rock Island, IL), culminating a process that could serve as a template for how to merge a credit union in a way that benefits both organizations and their members.

The Challenge

After years of considering a merger, loan defaults and investment returns that couldn’t keep up with operational costs forced the board’s hand at RIDFCU.

Karen Hagerty, a biologist and project manager with the Corps who was an RIDFCU board member at the time, says the board delayed merging mainly because it didn’t want members to lose an institution that had been around for a long time, and it didn’t want the credit union to lose its identity.

But independence was not in the future.

After serious strategizing and belt-tightening, it became obvious our credit union was not sustainable, Hagerty says. We began looking at merger options.

RIDFCU had experienced staff but could not offer internet banking, debit cards, or other basics members expected. The credit union had just stopped growing.

(photo: Karen Hagerty is a project manager with the Rock Island District of the U.S. Army Corps of Engineers and a board member of the former RID Federal Credit Union)

It had been losing money for several years and its net worth had declined as a result, says Daryl Empen, president and CEO of Gas Electric. It also had an engaged board of directors and experienced staff. I think they truly tried to turn things around, but they were simply unable.

The Process

The RIDFCU embarked on the merger process with some specific goals.

We wanted to keep our local office open and were looking for a well-developed network of locations as well as online banking, credit and debit cards, and ATMs, Hagerty says. We originally thought a credit union with many locations would be a better fit for our dispersed workforce. Technology allows remote access but nothing takes the place of someone who cares enough to know your name.

The board sent eight requests for proposals (RFPs) and interviewed five credit unions. That original group did not include Gas Electric. It was an RIDFCU board member, who was also a member of Gas Electric, who suggested the credit union talk with Empen about his credit union and its two mergers more than a decade ago.

The board was so impressed with Daryl’s leadership and philosophy that we also extended an RFP to Gas Electric Credit Union, Hagerty says.

Insights From Vetting

The RFP and interview process was eye-opening.

We learned everyone wanted to merge with us and most of them were interested in using our locations to expand their operations, Hagerty says.

RIDFCU’s assets were in decent shape because it had started the merger process relatively early, Hagerty says. And all but one of the credit unions were responsive and eager to share information.

(photo: Gas Electric Credit Union President and CEO Daryl Empen poses for a holiday party photo with his staff behind him.)

We were shocked by the lackadaisical attitude of one credit union that had been pursuing us for many years, she says. I guess it took for granted we would want to merge with it.

Darron Niles, an RIDFCU board member who now fills the board seat Gas Electric reserved for the merged credit union, attended meetings with prospective merger partners and says he learned some were just looking to gobble up RIDFCU. That wasn’t the case with Gas Electric.

Gas Electric, with its closed charter, looked at us like an additional member group, he says. The numbers worked financially, but our members became part of something bigger and better without losing RIDFCU’s identity completely.

The Decision

RIDFCU members agreed to merge with Gas Electric by a vote of 145-6 on Dec. 16, 2014.

The completed merger in 2015 was the culmination of a process that began with that initial meeting with RIDFCU’s board where Empen says he answered questions such as: What questions should RIDFCU be asking? Could it make it on its own? If so, how?

The board members engaged in a deliberative, thoughtful process to make the best decision for their members, Empen says. That’s what impressed me the most. It was clear this was what was best for the members, not just the board of directors.

“There is nothing wrong with growth. We all need to grow, but it should be based on member benefit.” Daryl Empen, President/CEO, Gas Electric Credit Union

For its part, Gas Electric tried to be transparent.

We were required to have a membership meeting to approve the merger, Empen says. We could have done the bare minimum for notifications, but we advertised it heavily. We wrote a detailed article in our newsletter about the proposed merger and the reasons behind it. We invited members to the meeting to vote.

That transparency also helped ease the fears of RIDFCU’s membership, Hagerty says.

We struggled to keep the rumor mill under control, she says. Members appreciated the clear communication of why we were pursuing the merger and what would happen if we didn’t.

The Aftermath

Gas Electric kept the RIDFCU office open and its longtime manager, Bev Rice, stayed on, providing a sense of familiarity and a cheerleader.

When you have the support of the staff, it makes the process smoother, Empen says. She’s (Bev Rice) has been a fantastic promoter of the credit union and the new services.

The main office of Gas Electric Credit Union, one of two branches, is also located in Rock Island, IL.

Those new services include debit cards, a checking option that returns 2.25% in rewards, internet and mobile banking, bill pay, and mobile deposits. Gas Electric also offers better rates on saving and loan rates than RIDFCU did, and a $250,000 bonus dividend paid out in 2015 didn’t hurt relationships.

That was a nice feeling to be able to reward all our members, including the new members from RIDFCU, Empen says.