Here is an article that will appear in the Tampa Bay Business Journal this Friday (March 6, 2009)
The boards of directors of two of the biggest credit unions in the United States, and the two market leaders in the Tampa Bay area — Suncoast Schools Federal Credit Union and GTE Federal Credit Union — have signed a letter of intent to merge the two credit unions.
If finalized, it would be the biggest merger ever of two credit unions, according to the Credit Union Journal , a trade publication.
Tom Dorety, president and chief executive of Suncoast Schools, and Wendall “Bucky” Sebastian, chief executive of GTE, said the proposed merger is subject to satisfactory due diligence review and regulatory approval. A final decision on whether to go ahead with a merger is still months away, Sebastian said, as the boards of each credit union review financial information and develop a business plan. If regulators approve, GTE members also would likely be asked to ratify the plan.
No decision has been made on a name or management for a combined organization, Dorety said. The letter of intent came after exploring the value of a merger to members.
“It provides them immediately with greater access to services. It enables us to have more resources to deliver products and services to members, and to do expansions more quickly in the future,” Dorety said.
While some economies of scale would result, no layoffs or branch closing are expected. The footprints of the two credit unions are unique with GTE stronger to the north and east of the Bay area and Suncoast stronger to the south of the Bay area. There are a few branches within a couple of miles of each other, but those happen to be each credit unions’ busiest branches, Dorety said. “What we expect is the combined entities will have more ability to grow,” Sebastian said.
Losses played no role
Combined, the two credit unions would have $7.8 billion in assets, based on their assets as of Dec. 31, and nearly 675,000 members, according to reports filed with the National Credit Union Administration. The combined organization would be the 5th largest credit union in the United States, Sebastian said.
The merger comes on the heels of each of the credit unions’ huge 2008 financial losses in the fallout from the mortgage meltdown and credit crisis. Suncoast Schools lost $76.7 million and GTE lost $27.5 million last year, reports filed with the NCUA said.
The losses did not play a role in the merger discussions, both executives said.
“If these were boom times, I think we would still be talking about this and making the same decision,” Dorety said.
Credit unions nationally reported a consolidated loss of $2 billion for the fourth quarter, the first quarterly loss ever for the industry, the NCUA said.
Suncoast, with $5.9 billion in assets and 471,441 members as of Dec. 31, is the seventh largest credit union in the United States. Headquartered in Tampa, it operates 50 full-service branches in 15 Florida counties.
GTE, with $1.9 billion in assets and 203,376 members as of Dec. 31, also is headquartered in Tampa and operates 38 branches in Florida, one in Louisiana and one in Maine, according to its Web site.
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4 comments:
We’ve all talked about the merger mania that could come from something as far reaching as our present financial climate. Well, the shock of the day just came to my email inbox.
This morning, both GTE Federal and Suncoast Schools Federal announced to their teams that the credit unions have entered into serious merger talks. Who would have guessed?
How should we respond to member inquiries / concerns?
• These are tumultuous times in financial services. There are likely to be many more such moves in the future. Tampa Bay Federal will watch these developments with a great deal of interest. Our eyes will be looking for opportunities to Serve Members Changing Financial Needs.
• The announcement of this planned merger does not mean either institution has significant problems. The announcement speaks for itself.
• Such a merger could open doors of opportunity for those smaller credit unions which stay close to their members, like Tampa Bay Federal.
Again, didn’t expect this. Can it get much more exciting?
A Team Member asked that I explain what a merger means. The short answer: “It all depends.” What might it depend on? Any number of issues. However, let me give you a brief look at a typical merger:
Balance Sheets are combined. Suncoast has $5.9 billion in assets. GTE has $1.9 billion in assets. After the merger the new credit union will have $7.8 billion.
Operations are combined. Suncoast uses fiserv Summit for their computing platform. GTE processes on the Open Solutions (OSI) platform. GTE Federal Credit Union is considered a “best practices” credit union for their data processing expertise. My guess is that the OSI platform will be used going forward.
Members will be served from the various branches: Suncoast 51 and GTE 38. Combined they’ll have 89 locations in Florida. These locations will likely be combined over time. Where they have branches that are only a few blocks apart, one location could be closed. (Conventional wisdom indicates that their associates were told that there would be no non-management job cuts for 18 months.) The immediate savings comes from Executive staff. Only one Chief Executive Officer; one Chief Operating Officer; one Chief Financial Officer; etc.
Of course, it’s not this simple. There are many stumbling blocks. The major issue is organizational culture. What if one organization is very formal and the other is not? What if one organization relies on Saturday operations and one does not? What if one organization relies on internal training and one outsources training? It’s not easy. Members get frustrated. Associates get frustrated. Yet, in the long run it seems to work out for everyone.
Today, I drove over to Orlando for a couple of hours to represent Tampa Bay Federal at a Special Meeting of the Florida Credit Union League. The meeting was called several weeks ago to vote on a merger proposal between the Florida and Alabama Leagues (state level trade associations). The Florida delegation passed the proposal 48 to 7. The Alabama League will hold a similar meeting tomorrow.
Interestingly enough, the subject of the Special Meeting was not as “important” as the news from Tampa – Suncoast & GTE to merge. It was very interesting to hear the points of view from around the state. Everyone seemed puzzled.
While I was away, another great question was posed by one of your colleagues:
…with a merger is it possible for both entities to keep their names and just the internal parts of the credit unions be one or is it necessary for one of the credit unions to change their name. Like for example, Will ‘GTE’ have to change its name to ‘Suncoast’ or vice versa?
It is possible to operate as separate organizations, externally. For example, Wells Fargo Bank acquired Wachovia. Today, they operate as Wells Fargo in the western part of the United States and Wachovia in the eastern part. It is expected that all branches will take the Wells Fargo name over time. It makes most sense when the organizations operate in different markets and well established brand names. By and large, Suncoast and GTE operate in the same market.
Taking this farther, credit unions generally have very descriptive names, associated with a “primary sponsor.” Suncoast Schools Federal Credit Union. GTE Federal Credit Union (GTE – General Telephone & Electric – no longer exists). My guess is that there will be a common name – neither Suncoast nor GTE. Remember when Grow Financial Federal Credit Union was Mac Dill Federal Credit Union? If not, it will likely be Suncoast Federal Credit Union.
Great blog Dale. I'll share it with some of my friends on Twitter.
A couple of things:
1. DP System - While OSI's system may be superior, it would be far less disruptive and much less expensive if GTE adopted the Summit platform -- fewer branches to convert, fewer staff to train.
2. Name - I like the idea of the organizations being able to keep their names, but there will definitely be only one name, and that name will be known within 3-6 months after the merger gets the green light. It would be completely impractical to have two separate marketing budgets for two different brands -- much more effective and cost-efficient to build one brand instead of two. My guess is that the name will be "Suncoast Credit Union." Again, this is the least disruptive choice for the majority of members. And quite frankly, there's nothing wrong with "Suncoast." It works well in Florida. The only reason to pick a new name would be political (something to appease the smaller GTE).
3. One has to wonder how Bucky's suggestion about hybrid banks/credit unions (taxed) plays into this.
http://tinyurl.com/bru7gh
4. The two credit unions have claimed they will gain efficiencies without layoffs. This will need to be explained to a skeptical membership.
5. As you noted, the two credit unions say there is no connection to the current economy. Again, members are going to view this claim with a high degree of skepticism. The reasons for the merger will need to be explained, and "gaining efficiencies" isn't cutting it (yet anyway, see #4). Why merger? Why now? In this economic climate, people are going to assume it's because they are suffering/struggling. The two credit unions will have to exert all the marketing and communications muscle they can muster to convince people otherwise.
FYI - You'll probably enjoy checking out my website, The Financial Brand.
http://thefinancialbrand.com
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