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Is Bigger Better?

East Coast Credit Union considers amalgamation

by Joyce MacDonald.

Will amalgamation mean that Credit Unions in small towns, like this one in the community of Port Hood, will have more of an urban focus?  Photo: East Coast Credit Union
Will amalgamation mean that Credit Unions in small towns, like this one in the community of Port Hood, will have more of an urban focus? Photo: East Coast Credit Union

East Coast Credit Union members are voting this month on whether or not to amalgamate with Heritage Credit Union.

East Coast Credit Union has thirteen branches, located in Margaree, Inverness, Mabou, Port Hood, North East Margaree, Baddeck, Port Hawkesbury, Havre Boucher, L’Ardoise, Louisdale, North Isle Madame and St. Peter’s. Heritage Credit Union has eight branches, located in Halifax, Dartmouth, Elmsdale, Fall River, Lower Sackville, Sheet Harbour and Upper Stewiacke.

“The big challenge we have now is looking at the business our members do from various parts of the province back to the home branch,” said Don Pottie, chair of the East Coast Credit Union’s board of directors, noting that if they had branches in Halifax, it would make it much easier for members to do business there.

He pointed to the history of credit union amalgamations in Nova Scotia, saying that there have been 84 such amalgamations since 1966, and none of them have failed.

“We’re cooperative by nature, we’re cooperative by design, but we’re not a united cooperative,” said Pottie.

He said he believes that more amalgamations are the way of the future for credit unions. The board of directors is recommending that members vote in favour of the merger.

But not everyone agrees. Daniel Paturel is an accountant and a member of East Coast Credit Union. He got the financial statements for both ECCU and Heritage Credit Union from their respective web sites, and took a look at the numbers.

“I don’t see how this is a win for East Coast Credit Union,” he said. “ECCU members could have $3.178 million of their retained earnings transfer to the members of the HCU. This is calculated as follows: Before amalgamation the retained earnings of the ECCU as of December 31st, 2009 was $13,611,706 divided by 16,176 members or $841.47 per member. The HCU only had $5,376,371 with 13,268 members or $405.43 per member. After amalgamation, the combined retained earnings would be $18,988,077 over a total membership of 29,444 or $644.98 per member. This loss of $196.49 per member times 16,176 members equals $3.178 million lost by the ECCU members at the same time the HCU members gain the same $3.178 million.”

He also points to the fact that Heritage Credit Union has $3.8 million in special Class A shares which can be removed by their owners at any time and which can be paid a dividend of up to five per cent before regular members receive any dividends.

“The HCU's equity position removing these Special Class A shares that can be withdrawn by the owners at any time is only 4.101 per cent versus our eight per cent,” said Paturel. “The board is asking us to support an amalgamation with a credit union with a much weaker equity position based on past profits. Why would we dilute ourselves? Why would we make our financial picture weaker? I could not justify doing this as a business decision, if it was my client.”

Pottie said that when the credit unions that now make up the East Coast Credit Union amalgamated in 2003, some of the branches were in weaker financial positions, but they all worked together to become one credit union.

“I don’t think anyone can deny that has been better for the members and the communities that they’re in,” said Pottie, who admits that Heritage Credit Union is in a weaker financial position. “The idea is not for one to take over the other, but to come together as equals.”

He points to increased opportunities for staff in a bigger organization, the chance to retain members who move to the Halifax area and to more opportunity for growth as some of the advantages of amalgamation.

Paturel disagrees.

“I don’t think that bigger is better, and I don’t think that heading our credit union toward metropolitan Halifax is necessarily a good thing,” he said. “They have not convinced me that this is going to improve my services as a member.”

He points to increased management costs, a possible urban focus and the fact that amalgamation will weaken the East Coast Credit Union’s financial position as some of the concerns he has. He has a more complete rundown of the numbers and his concerns which is available by emailing him at dpaturel@ns.sympatico.ca.

There is also an information packet prepared by the board of directors, which is available to credit union members by request and can be picked up at any ECCU branch.

The issue will be decided at a meeting on Tuesday, March 29th at 7:00 p.m. at the Port Hawkesbury Civic Centre. Members can also, for the first time, vote in the branches up until that date.

“They have an opportunity to go into their branch and make a decision,” said Pottie. “It’s the democracy that’s been missing for a long time.”

There is also an opportunity for people to vote by mail-in ballot, for those members who are away working or otherwise unable to make it to a branch. Pottie urged all members to vote.

“The board can recommend something, but the membership decides,” he said.

This article was originally published in the Inverness Oran. 

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Topics: Cooperatives
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