Keesler Federal Credit Union, a $2.1 billion Biloxi-based member institution, has set the stage for entry into the metro Jackson market with acquisition of the $4.8 million Mississippi Department of Transportation Federal Credit Union.
The deal closed March 31. Convergence of the operations is to be completed by June 30.
Both non-profit entities were among Mississippi’s earliest credit unions, with MDOT starting its operation in 1941 and Keesler in 1947. Keesler began as a CU for military personnel at Keesler Air Force Base but has since grown to just at 187,000 members and recently expanded into Slidell, La., near New Orleans.
The growth has made Keesler CU Mississippi’s largest credit union and gained it a 2010 federal government designation as the nation’s 63rd largest credit union.
The approximately 1,000-member MDOT credit union limited membership to agency employees.
Jeff Gerard, COO of Keesler CU, said the MDOT takeover will be a springboard for establishing several branch operations in the metro market.
Initial members will be MDOT employees and retires as well as “anyone else we can get to sign up,” Gerard said.
“We’ll be active in signing up new businesses,” he said, and noted Keesler recruits its members in a business-to-business fashion instead of seeking individual members. Individuals can join, however, through paying a $5 membership fee.
In addition to business groups, Keesler in the months ahead will be looking at other groups for membership, including school systems and churches.
The acquisition, Gerard said, ensures that members of the MDOT Federal Credit Union will see a significant increase in service offerings.
A strong part of Keesler’s appeal, he said, is that the one-time membership gets a member free checking with no minimum balance, debit cards and a roster of financial services similar to those offered by for-profit banks.
Services include home mortgages, auto loans, online and mobile banking, remote deposit capture and wire transfers. Keesler will also do indirect lending with auto dealers in Central Mississippi, a practice that Gerard said has brought it increased business along the Mississippi coast and Slidell.
Credit union advocates say the acquisition of small credit unions by large ones can lead to better value for the customer. The larger the credit union, the greater the ability to pass lower loan rates and higher dividend rates for the benefit of the membership, advocates say.
What’s more, as a credit union grows, economies of scale bring down its net operating expense load, they note.
Gerard said Keesler has had an important part in helping to bring financial services to the state’s un-banked and under-banked populations. That effort will continue in the metro Jackson market, he said.
“I think the services we provide, competitively priced, allow us to understand the needs of those who may not be the best credit” candidates, Gerard added.
Some may only qualify for a savings account, but: “We welcome the opportunity to serve those members and to work them into a more traditional account.”
Both Keesler CU and MDOT CU are highly rated by Bauer Financial, an independent financial services rating agency based in Coral Gables, Fla. Bauer awarded Keesler CU five stars at the close of the fourth quarter of 2013, a designation that denotes “superior.” MDOT CU received four stars, a designation denoting “excellent.” Institutions that received the five and four-star designations go on Bauer’s “recommended” list.
The merger required the approval of the National Credit Union Administration, the federal regulatory agency and provider of deposit insurance of up to $250,000 per account.
Gerard said the merger began developing in late November after MDOT Federal Credit Union encountered capital difficulties and approached Keesler. “We reviewed their loans and their similarities” with Keesler, he said.
“We did not see much in the way of cultural differences. We decided this would be a great way to serve their members who work across the state and give us an option for building new employer groups” in metro Jackson.
Nationally, the number of credit unions has declined but assets have grown, the National Credit Union Administration says. From 2006 to 2010, federally insured credit unions went from 8,362 to 7,339. For the same period, assets grew from $710 billion to $914.5 billion.
As the decline in credit unions shows, small credit unions have had an especially difficult time surviving during and after the nation’s banking crisis. “The regulatory environment has become increasingly difficult for smaller credit unions to keep up,” Keesler’s Gerard said, echoing a lament often made by community bankers about their sectors.
Regulatory complexities and the time and money needed to address them can force smaller credit unions to consider acquisition options as an alternative to shutting down, said Jimmy Smith, president &CEO of the $195 million Singing River Federal Credit Union in Moss Point and chairman of the Mississippi Credit Union Association.
“They don’t have the expertise, money or staff to keep up with the regulatory burden,” Smith said.
Nor, in many instances, do they have the resources to compete on the services front with their larger counterparts, he added.
“Consumers are demanding the technological advances. Without them you’re not going to be relevant in this market.”
On the other hand, a small credit union can’t go short on the services front, not if it intends to keep the portion of its membership that has become accustomed to personal service, Smith said.
Achieving that balance is expensive, he noted.
Single-sponsor credit unions such as MDOT said Charles Elliot, executive director of the Mississippi Credit Union Association, said some smaller credit unions have sought to survive by recruiting new business employee groups into their ranks. “But it is hard to do that when you don’t have a lot of services to offer,” Elliot said.
Ultimately, the members of MDOT Federal CU are the winners here, Smith said. “The membership of MDOT will be far better served.”