Amalgamation — Driving Factors, Process
Q: Why do we need to amalgamate? Why can’t we just carry on as before?
A: Both credit unions are financially strong and proud of their many years of service as independent credit unions. We are proposing this amalgamation for a number of reasons.
The financial services industry has changed dramatically in recent years, and will continue to change, in such a way that joining forces to share resources has greatly gained in importance.
- The cost of compliance with increasingly complex and numerous regulations and procedures is an issue for each of our credit unions.
- The cost of keeping up with the technology that today’s members expect continues to rise. Being able to share those costs will significantly benefit us all.
- Our low interest environment couple with increased competition continues to add pressure to our financial margins.
- Erickson Credit Union is looking for a partner who can deliver senior management experience and expertise. Crocus can deliver that directly, and create an environment of collaboration that will carry on within the amalgamated credit union.
Other key functional resources — and external costs — that we currently maintain and pay on our own. Combining Crocus and Erickson credit unions will result in an entity with assets of $180-million — a larger, stronger credit union that will grow along with its communities while continuing to deliver the personalized service members expect and deserve.
Sharing resources will also result in a higher level of expertise in key areas, as specialization is increasingly required in today’s financial services industry. Together we can share the additional costs required to provide our members with the specialized services and expertise they require.
This environment — this business model — of sharing expertise and resources, of collectively seeking opportunities, are what we need as we strengthen our position for the future.
Q: What steps did you take to reach the conclusion to propose an amalgamation?
A: There has been a slow but steady move toward amalgamations in the national and provincial credit union systems, and we have been able to judge the relative merits of amalgamation.
Specific discussions between these two credit unions have been ongoing for over six months. The boards and management teams of both credit unions have been full participants in discussions, and the boards, management and staff of both fully support the amalgamation.
The results of the next step, the due diligence process, showed that we had very similar business philosophies and plans for future growth. It clearly pointed to all the opportunities that an amalgamation of our credit unions would realize.
There is a sound business rationale to proceed with this partnership and we strongly believe in the model we have created – which is about building a single, stronger credit union that adheres to the current organizations’ values, commitment to members, and the communities they serve.
Q: How will this combination benefit the members? Aren’t you actually reducing the competition?
A: There really isn’t any competition now between our credit unions, but we both face competition from outside sources, like FCC, MASC, and the banks — and they will still be there. By amalgamating we will be stronger, we will be better able to counter our main competition and provide even better service to our members.
Q: Will Erickson not just be swallowed up by Crocus?
A: No. Both of these credit unions are quite small, compared to the large ones in the province, not to mention the banks. We are used to operating on a smaller scale and our responsiveness to our members and our members’ communities — our communities — bears that out. We see this as a partnership and a mutually beneficial union, not a takeover. The board will continue to be composed of people from the current membership, and board decisions will, as always, be based on what is best for the credit union.
Q: Why should I vote on this proposal? I’ll just accept whatever happens.
A: If you’re convinced this is such a good idea that you don’t need to vote on it because everyone will think so, too — please come out and vote. We believe this is the right strategy for our organizations, and your vote will help make it happen.
Q: Why are these two coming together?
A: We share similar values in terms of how we treat our members and employees, and how we respond to the needs of our communities. We have shared visions, philosophies and goals and we have similar organizational cultures that will enable our employees to transition into the new entity in a quick manner with little service disruption.
Q: What will the name of the combined credit union be?
A: This is a decision the board of the new credit union will make.
Q: How much of a majority is needed to pass this proposal?
A: A vote in favor by two-thirds (66.66%) of members present at the special general meeting is necessary to approve the proposal.
Q: Does this amalgamation make sense financially?
A: Yes. The savings in areas such as compliance and senior management, as well as technology and other shared services, will be significant to credit unions of our size. In addition, the formation of the amalgamated credit union would create a more diversified organization that is less susceptible to economic downturns and threats. A diversified loan portfolio would result in a healthier organization that is less vulnerable to downswings in certain sectors, such as agriculture, retail housing and tourism. An increased deposit base would generate better returns for the credit union and result in more competitive rates for members. A strong, healthy credit union creates longevity and stability in the communities it serves: the amalgamated credit union would be a strong component of growth in our communities.
Q: How will this plan reduce costs?
A: Credit unions face much higher costs today than they did even five years ago, in areas such as audit, financial reporting, compliance, and new banking systems. Emerging personal banking technologies, which we all want to implement, are also expensive. It is becoming increasingly difficult to balance these costs while offering competitive rates and services, and new technologies.
We know from assessing other amalgamations that economies of scale will be achieved and overall cost structures will go down as we move forward.
Q: Could the same goals be achieved by sharing services among CUs?
A: We had developed a plan to share senior management, but that is not the only duplication, as each credit union requires a similar basic management and support structure in order to operate. Dedicating people to specific functions is more efficient and will provide significant benefit to the credit union and members.
Q: Will our credit unions be in trouble if this amalgamation is voted down by members?
A: No. Both credit unions are strong and viable and would continue to be even if members reject this proposal.
Q: What else does this amalgamation bring us?
A: Crocus owns an insurance agency, income from which will benefit the new combined credit union. There is also the advantage that members will have more branches to deal with outside of their home communities. This will benefit members from Brandon, for example, who visit or spend extended periods at Clear Lake, or students from Erickson and its trading area studying at BU or ACC.
Communities & Branches
Q: How will this amalgamation affect the level of community support?
A: We would remain focused on enhancing the communities we serve. Both credit unions have strong ties in their communities, are strong supporters and participants in the development of these communities, and the levels of support and participation in these communities will NOT be negatively affected as a result of the amalgamation. If anything, they are more likely to be enhanced by virtue of the increased resources of the amalgamated credit union.
Q: Will any branches be closed because of this amalgamation?
A: If a branch were to close eventually, it would not be because of this amalgamation.
Each branch will remain open as a branch of the amalgamated credit union so long as its community continues to support it. By ‘support’ we mean the level of business the community uses the branch for. If a branch were to experience a significant drop in business, to the point where it is actually costing the credit union to keep it open, then we would look at the viability of that branch.
Q: What about sponsorship of community events?
A: Both credit unions are committed to the communities they serve, and the ties that currently exist between communities and their credit unions will continue to be extremely important to the amalgamated entity.
Q: How will profits go back to the community?
A: Donations and sponsorships will continue in both communities. Opportunities in both communities will be considered by management and/or the board.
And, as is the case now, funds on deposit will continue to be loaned out in the form of consumer, producer/business and mortgage loans, where they will continue to generate economic activity in all our communities.
Products & Services, Rates & Fees
Q: What about the loan/mortgage I have with my credit union?
A: All loans currently held by either credit union will be transferred with no change to term, balance or interest rate.
Q: What happens with credit union Equity and Surplus Shares?
A: Surplus shares and patronage dividend programs will continue, as long as the credit union’s equity requirements are being met, and the equity members currently have will remain in the amalgamated credit union as surplus shares.
Q: Will service charges go up as a result of the amalgamation?
A: As the credit union adds new products and services, members making use of the services will pay fair rates for those services. In keeping with the past record of both credit unions, services charges will remain competitive with other financial institutions.
Q: What happens to my account number?
A: We expect there may be changes to some account numbers, but we will not know until after the amalgamation exactly how. Where disruption does occur, we will do everything we can to minimize it.
Q: Will I still be able to use my Member Card?
A: We may need to issue new Member Cards to members if we change some account numbers. If that is required, everything will be done to make the process simple.
Q: Will my branch hours of business change?
A: As has always been the case, a branch’s hours and days of operation are dependent on demand from members for the credit union’s services. This will not change in any way as a result of the amalgamation.
Q: What kind of new services are you proposing?
A: We are comparing all products and services both credit unions currently offer. Our plan, once the amalgamation is approved, would be to use or even enhance what we believe to be the best combination of products and services. If, through economies of scale, we would have more money to invest in new products and services, we will do so.
Democracy & Ownership
Q: Will I still have a say in my credit union?
A: Yes, all members will continue to have a say in the new credit union. The co-operative principle of “one member, one vote” will still apply, of course, so all members have an equal say in their credit union.
Q: Where will the chairperson come from?
A: The chairperson of the board of directors is elected by the board members. In other words, the criteria for election to the board of directors and election as chairperson is membership in the credit union and a desire to serve the best interest of fellow members.
Q: How will the board be structured?
A: The initial nine-member board will be composed of five directors from Crocus Credit Union and four from Erickson Credit Union.
Q: Will any employees lose their jobs because of this amalgamation?
A: Both boards of directors have made a commitment that there will be no job losses, demotions or salary cuts as a result of the amalgamation. Staff will benefit from training, compensation and career advancement opportunities they may not have had access to before. There will be more than enough work to do to for everybody in bringing the organizations together and harmonizing policy and procedures over the first few years and any gains we might see down the road can easily be dealt with through staff attrition.
Q: Where will the head office be located?
A: The location of the head office will be decided by the new board.
Q: What will the management structure look like?
A: The new board will hire the CEO after the membership has voted in favor of the amalgamation, and the CEO will identify the senior management team.