New Preferred CU will cover 28 counties
Grand Valley Co-op and Preferred Federal combined will have more than 24,000 members.
Grand Valley Co-op Credit Union of Grand Rapids and Preferred Federal Credit Union of Greenville have announced the result of their July merger will give the new entity six full-service locations from Kalamazoo to Ludington.
The combined credit unions will be called Preferred Credit Union, which will be headquartered in the former home of Grand Valley Co-Op at 3767 Sparks Drive SE in Grand Rapids. A new board of directors will consist of the Grand Valley Co-op and Preferred Federal directors; the management team will be led by Grand Valley Co-op’s president and CEO, John Yeomans.
No branches or jobs are expected to be eliminated as a result of the merger.
“Both credit unions have been seeking alternatives to diversify their membership base to enhance the prospect for long-term success in the challenging Michigan economic marketplace,” said Russell Herman, chairperson of the Grand Valley Co-op board of directors.
“The merger will allow both credit unions to achieve this diversity,” he said.
Margaret Rassmussen, chair of the Preferred Federal board, said that due to the new organization’s strong capital position, efficiency gains, diversification and growth, Preferred Credit Union will be able to extend its products and services to a broader population.
“We were both financially very strong; we both received our five-star ratings this last year,” said Yeomans.
That strength includes “very strong return on assets” and “great capital, but we understand it’s a very tough market,” added Yeomans, citing more competition from all areas, including the Internet.
The new, larger CU will have about 60 employees and $149 million in assets, according to Yeomans.
The new organization participates in CU Service Centers, which means all Preferred Credit Union members, when traveling, can access their accounts through more than 5,000 other credit unions in the CU Service Centers network across the nation.
Yeomans said a service like that puts Preferred on more of an even keel with big banks that have lots of facilities.
The merger is expected to put Preferred among the top 25 percent of credit unions in Michigan in terms of size. According to the Michigan Credit Union League, as of Aug. 1 there were 299 credit unions chartered by the state of Michigan, with the number gradually declining due to mergers.
Starting a new credit union from scratch is challenging: The new Community Promise Federal Credit Union that opened in Kalamazoo in February needed five years to make it happen. Its goal is to serve and help educate low- and middle-income people who often struggle with predatory rates and fees charged by payday lenders.
One of the biggest issues in credit union management is the same one bankers have mentioned to the Business Journal in recent months: compliance with government regulations.
“The demands placed on (credit union management) from a regulation standpoint have gotten much harder,” said Yeomans.
Another big issue: net margins “because of continuing low (interest) rates,” he said, noting that the Fed has been keeping interest rates near zero “for a long time.”
Information technology is another huge issue that “all financial institutions look at because members want more things like mobile banking, more ATMs and bill pay,” said Yeomans, and many CUs are investing resources in IT to meet those demands.
Yeomans said credit unions apparently did not suffer as badly as banks in the recent Great Recession for the simple reason that CUs haven’t nearly the level of business lending that banks do. Many banks that failed during the recession were brought down by commercial loans that soured — especially in Michigan as the auto industry nearly came to a standstill.
Yeomans said credit unions also were spared the worst of the home mortgage failures felt by the banks: “We’ve always been fairly conservative.”
The unusually low interest rates over the past few years are “wonderful for the borrowers, but a lot of (credit union) members who are older, it’s hurting them a lot. They had banked on that” interest on their retirement savings accounts, noted Yeomans.
Credit union members’ deposits are insured just like bank deposits with their FDIC insurance; at credit unions, the coverage is by the National Credit Union Administration.
Yeomans sees an “uptick” in the Michigan economy this summer.
“I think we’re seeing people being a bit more confident,” he said, noting that many people also have hung on to some new habits they picked up as a result of the recession — namely, putting some money away for the future and refraining from going crazy on credit cards.
“Plus, I think the real estate market has helped make a comeback in Michigan as a whole. In certain areas, it is quite significant.”
In West Michigan, he said, people in finance are seeing a big increase in home values, and some people are even borrowing more these days on the equity they have in their homes.
“People are a little leery, but they are more confident,” he added.
The former Preferred Federal Credit Union was set up by Federal Mogul Corp. employees in Greenville in 1954. At the merger, it had $52 million in assets and more than 10,000 members. Grand Valley Co-op was a community-based CU (as opposed to an employment-based organization) set up in 1968, and had $96 million in assets with more than 14,000 members.
Officials of the new Preferred CU are awaiting confirmation of their expanded charter by the state of Michigan, but Yeomans said the merger has actually been in effect since July 1.