PORTLAND, Ore. – Regulatory pressure, the need to offer betterproducts and services to members, and a lack of a succession planfollowing a CEO's retirement are all common reasons behind a smallcredit union's decision to merge into a larger cooperative.

But these days, even healthy, mid-sized credit unions areconsidering mergers, simply because they must compete with the country'slargest financial institutions, according to Roger A. Jones,managing partner for the Redmond, Wash.-based CPA firm Jones &Sas, LLC.

Jones, who has worked as a bank and credit union mergerconsultant for the past 21 years, offered advice to credit unionexecutives and board members during a breakout session at NWCUA's Amplify Thursday.

Since bigger credit unions tend to tout better financials,smaller credit unions should certainly consider merging, Jonessaid. Citing the NCUA's Financial Trends Report from June 2014, hesaid credit unions with more than $500 million in assets achievedhigher growth and loan to share ratios. For example, credit unionswith $500 million in assets or higher had an average asset growthrate of 9.17% compared to 6.63% for credit unions with $100 millionto $500 million in assets.

“There are significant, immediate and persistent benefits,” hesaid of mergers. “These are not just short-term benefits, they kindof go on and on.”

He urged credit unions to be practical during every step of themerger process. When shopping around for a potential partner, herecommended focusing on the institution's organizational fit,mission statement, membership composition, products and services,and experience. Then, he said, the credit union should focus onmaximizing the accounting side by focusing on three aspects ofaccounting: Pre-merger GAP capital, fair value adjustments andpost-merger trailing costs.

Merging credit unions also need to focus on managing their boardmembers' expectations, Jones said. While achieving the rightcultural fit is a huge concern for board members, so is thefinancial impact of a merger.

“What I hear a lot from board members is: Are we going to makemoney on this? Should we be concerned about losing? What are thefinancial outcomes? But boards need to understand that mergers canoften benefit the surviving organization,” he said.

He also offered the following practical tips: Have a mergerresponse plan in place that accounts for succession planning andvendor contracts, don't fixate on minor details in the exact valueof the portfolio, and be concerned about your credit union'soverall health and its ability to recover from a temporarydownturn.

Jones also noted mergers of equals as an emerging trend, butpointed out that they are the most complex types of mergers becausethere is no dominant partner involved and they result in thehighest noninterest expense reductions.