Citing competition from both banks and larger credit unions, the$64 million Valleystone Credit Union of Wilbraham, Mass. is optingfor a merger, now approved by NCUA, with the $415 Polish NationalCU of Chicopee, Mass.

In a message to its 4,700 members, the president/CEO ofValleyStone, James P. Nagy, said it found the regulatory climatetoo challenging to continue.

“Your board felt that now was the time to act when were able tonegotiate from a position of strength to provide members with astrong financially vibrant credit union in the future,” wroteNagy.

Nagy stressed that its merger with Polish National “was notundertaken lightly” and followed a lengthy search for the optimumpartner which began some time ago.

Nagy called Polish National with 18,000 members and six branches“one of the healthiest financial institutions in theCommonwealth.”

Valleystone, which lost $244,000 in 2011 and $71,000 the yearbefore, does retain 20% net worth.

The proposed merger is subject to approval of Valleystonemembers May 1 and of the Massachusetts Division ofBanks.

Valleystone members have been meeting in a series of town hallsessions in April with a final one slated on Wednesday in VSCUoffices.

Nagy said that as a result of the merger Valleystone memberswill be afforded “cutting edge technology, 24/7 phone, online andmobile banking technology and a sophisticated array of financialproducts to rival any of the big banks.”

In hailing the benefits of a merger, Nagy candidly cited theinternal problems of a smaller credit union dealing with a grayingmembership.

“Valleystone's members are on average older than the region'spopulation at large,” wrote Nagy. “Being older, they are net saversinstead of borrowers. All their borrowing is done. Theyaren't buying homes. They aren't getting as many new-carloans.”

Thus “we need to make those loans to make money and we don'thave the marketing budget to be able to compete with some of thelarger community banks.” Meanwhile, regulatory costs are alsogrowing, he said. “Laws including the federal Dodd Frank financialreform bill must be complied with and that requires staff time. Tothrive, a financial institution has to spread that cost out over asmany customers, members in the case of credit unions, as possible,”Nagy concluded.