Trade Reports Place Washington in the Middle of Merger Trends

Two reports by the Credit Union Times’ Jim Rubenstein this week placed Washington in the middle of what may be examples of trends in strategic mergers between credit unions with multi-state operations.

Rubenstein’s article discussed the NCUA approval of the merger between Alaska USA FCU and Transportation Northwest FCU. While Alaska USA already has a limited footprint in Washington as an out-of-state credit union, the pickup of Transportation Northwest means the $4 billion credit union can essentially begin serving any Washington resident. But it doesn’t come without some controversy.

Last April the CU Times reported that the $228 million Prevail Credit Union had taken on the operations of Transportation Northwest under a preliminary agreement subject to regulatory and member approval. But after a due-diligence study, decided to not go forward with the plan without NCUA assistance on the ailing credit union’s loan losses.

The NCUA refused and following a weeks-long process, Alaska USA apparently chose to simply absorb Transportation Northwest’s losses. The credit union was suffering from a 14 percent delinquency rate and a 1 percent net worth.

“I am getting an education on how this process works but not sure our experience is much different as what happened in Utah,” Prevail President and CEO Tom Graves said in the CU Times report, alluding to out-of-state CUs expanding footprints in that state through voluntary and involuntary mergers. 

In the final rundown, according to Graves “when we asked to receive financial assistance on the loan losses,” the NCUA suddenly switched to a bidding process, Graves said.

While disappointed with the decision, Graves indicated in Rubenstein’s report that he still supports the final result of protecting members. 

For its part, Alaska USA is now the second largest credit union in Washington operating with what is essentially a statewide field of membership.

The NCUA additionally this week announced the approval of the $4.6 billion merger between First Tech and Addison Avenue Credit Unions, the largest interstate merger in credit union history. Though still waiting for regulatory and member approval, Rubenstein reports that it “has been eight months in the process stage and signals perhaps a new era in CU consolidation trends.”

According to the report, the NCUA actually approved the merger deal Sept. 15 after an 8-month delay that industry analysts say was linked to the resolution of the corporate restructuring, myriad issues involving balance sheet considerations and federal/state chartering problems.

First Tech Credit Union has been gradually expanding in Western Washington, where it now has five branches, including one that opened this week in the rapidly developing neighborhood of South Lake Union. And even though its field of membership is limited, the technology hub that is the Seattle market holds much opportunity for the Oregon-based credit union.

Posted in Business Solutions, NCUA.