Credit Union Board of Directors - Merger Education

Mergers: A Key Topic for Director Education

It seems mergers are always a topic of discussion in the credit union world these days. Interestingly enough, however, despite the constant conversation around the topic, many credit union leaders are unprepared when they’re actually face-to-face with decisions applicable to a merger.

Merger education for directors should be an ongoing and constantly-evolving conversation within your organization to ensure that your team isn’t caught-off guard, should the opportunity arise.

The following are imperative points your credit union’s merger education plan should incorporate:

Duty of Care & Duty of Loyalty

As part of their leadership role within the credit union, directors are obligated to both duty of care and duty of loyalty, as defined by the NCUA’s general authorities and duties of Federal credit union directors rulings. These rules are in place to ensure the best interests of credit union members are always the first and foremost concerns of the organization. A credit union director has a duty to act in the best interests of the CU’s members rather than his or her own personal interests.

Duty of loyalty indicates a leader must “carry out his or her duties as a director in good faith, in a manner such director reasonably believes to be in the best interests of the membership of the Federal credit union.”

These obligations are meant to protect the overall well-being of the credit union’s community of members. Directors must continually seek ways to advance the organization, putting members’ needs and best interests above those of third parties or their own personal interests.

As a leader, you must ask yourself, “Am I doing everything I can to give my members the very best products and services available in today’s credit union economy?” If the answer is ‘no’, you should consider the ways a credit union merger can enhance members’ financial lives.

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Although most credit union directors primarily envision their organization as the continuing credit union, leaders must evaluate the potential of an acquisition with absolute honesty.

The reality of a merger is that one organization will continue and one will be acquired. With a 50/50 chance on either side, it’s important that leaders be prepared to assess with situation would ultimately be best for his or her members.

Well before you’re approached by another financial institution, you should have a firm grasp of your CU’s health and competitive stance in the market. Understand credit union merger benefits and best practices now so you know how you would respond if you were approached with an acquisition offer, and know what the criteria would be that may make you consider doing the deal.

Maintaining an Attractive Position in the Market

Directors must understand what it takes to be successful as an acquiring credit union. Leaders must be constantly aware of what other organizations are offering their members so they stay competitive.

Your organization’s merger education plan should incorporate detailed, thorough answers to the following questions:

  • What would the terms would solidify a deal if a merger was in our future?
  • How can we position ourselves to be attractive to others?
  • How do we go about proactively engaging in merger discussions with other credit unions?

Developing Critical Criteria

Directors must put a plan in place to understand what criteria the credit union should use to develop a target list of potential partners.

Successful mergers employ forethought and careful planning to ensure a marriage of CUs can be made in a transaction that’s beneficial to all involved.

As part of your director merger education plan, be mindful of the factors that would enhance or hurt your current situation. There are a few essential ratios in the credit union industry that will help you understand whether or not you should consider a merger. These ratios will also help you understand what to look for in a potential partner to optimize merger success.

Beyond anything, credit union directors’ merger education curricula should promote the possibility of mergers as a positive thing. After all, a credit union that has positioned itself as a sought-after organization in the market has plenty of reasons to celebrate its success!