Tiny credit union still searching for merger partner after rebuffing

Daily Record, The (Baltimore), Feb 2, 2005 by Kathleen Johnston Jarboe

Baltimore's White Eagle Credit Union will continue to look for a merger partner after declining an offer by the largest Maryland- based credit union, according to an official involved in the deal.

The State Employees Credit Union of Maryland Inc. received a letter from White Eagle declining the offer on Monday, a SECU executive said. The tiny credit union's members had voted against the plan.

There were a few things we couldn't agree on, said Hank Madera, vice president of operations at Linthicum-based SECU. He declined to comment on the issues that kept the two groups at odds.

White Eagle officials did not return calls for comment.

SECU filed the application to merge with the White Eagle in December. The proposal came after White Eagle initially approached the larger institution in August about merger possibilities.

White Eagle's small financial cooperative has just 390 members - a blip compared to the 240,000 member SECU and its $1.4 billion in assets. White Eagle is open only one day a week for a few hours at night. It holds just over $1 million in assets.

The Fells Point institution started as a savings and loan serving the Baltimore Polish community. It switched its charter to a credit union in 1989.

Industry experts said several challenges have prompted credit unions to merge even as membership has increased generally. Regulatory costs and new banking technology make it increasingly difficult for small credit unions to compete with the services of larger banks. Smaller credit unions also perennially face the challenge of leadership succession when those who founded the union wish to move on or retire.

If the deal had gone through, the White Eagle location in Fells Point would have been sold, with profits going to its members, Madera said.

SECU's growth from the merger also would have been limited.

State regulators last year informally told the larger credit union that White Eagle's field of membership couldn't transfer to the larger institution, Madera said.

Any new credit union members must fit certain criteria - its field of membership - to join. Some cooperatives base membership on a place of work, like SECU. But others have a community charter based on geography.

If they don't have a community charter, they can't serve a geographical-based membership, said Pat Keefe of the Credit Union National Association.

White Eagle's charter to serve residents within a 20-mile radius of its only branch didn't mesh with SECU's. Madera said Maryland financial regulators told him such membership fields were rarely granted now.

That meant SECU could only have gained White Eagle's assets and its current membership list.

With due diligence and without a new supply of members to join its ranks, SECU had several requests to proceed with the merger. So did White Eagle. Madera said the two groups couldn't come to a compromise.

We decided it would not be the best for either one of us [to merge], Madera said. They decided that perhaps they could find a partner who would do more of the things they were looking for.