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Joyce Endee

Some Woodlands Credit Union member concerned about proposed merger

Management says financial concerns and better services drove the decision

October 03, 2012
BERLIN -Woodlands Credit Union members were notified in July that the Woodlands Board of Directors had voted to pursue a merger with North East Credit Union, a banking group headquartered in Portsmouth serving communities Concord and south.

Since then some members, spearheaded by Cindy Woodward, a former long-time employee and member, have raised concerns about and opposition to the proposal. Several letters to the editor have been printed and yard signs opposed to the merger have appeared.

Woodward has written two letters asking Woodlands' CEO Timothy Collia to address several issues/concerns raised in her letters in print so all members could see the responses. Other members have voiced their concerns in print as well.

Colia told the Reporter he has tried to call all those who have written a letter. A couple he was unable to find phone numbers for, but said he did contact Woodward and she said she was too busy to talk to him on the phone.

"Does she want answers or want to stir up the pot," he asked. He said she also started a Facebook page and used a profile picture of two current members of the board that she did not have permission to use and the credit union's attorney had to contact her about removing them, which she did. He noted that none of the people who wrote letters had contacted him for more information before writing them.

Woodward said Collia did email her after her first letter appeared, but she said with two businesses to run (she and her husband own the Alpaca Store and the Village Deli and General Store in Milan), she was too busy to spend an hour, which she said was how long he said it would take to explain everything, on a phone call. But she said she also felt talking with just one person, herself, would not help other members concerned about the proposal. She said she asked him to respond in print because that way several concerned members would get answers to their concerns.

Members were first notified, she said, in a July 23 letter. That letter stated as reasons for the proposed merger increased product offerings in a more cost effective way. It stated approval would be needed from the N.H. Banking Commission and the National Credit Union Association (NCUA), which was expected by January 2013.

Woodward said a loose group of members with concerns has formed. A few have attended meetings, others have just phoned or emailed, or stopped at the store to talk. She said she and her husband purchased the signs, which are available at their Milan store.

"A lot of members and people who are unhappy with this are unhappy because we feel it was just sprung on us. A lot of people think they should have been asked if we even wanted to pursue this," she said. "At the annual meeting they stated how strong the credit union was. A lot of us are asking how this even came about. If everyone understood the reasons why, we'd feel better."

A 19-year long employee, Woodward said she knew some of the founders of Woodlands, originally United Brotherhood Credit Union, formed in 1956, and, knowing their intent in founding the credit union she doesn't believe they'd be in favor of this.

Also, Woodlands has always served the north country and some members are concerned about what they will have in common with a credit union serving the southern part of the state.

Last week Collia sent out a letter to members that addressed at least some of the concerns expressed by Woodward in her letter. He sent a copy to the Reporter as well.

Collia said credit unions make their money from the difference between the interest on loans and the dividends paid on deposits, known as the "interest margin." Loan interest, the letter states, is the biggest source of income.

"Today's low interest rates, the declining loan balances on our books and a weak demand for new loans makes it difficult for the credit union to maintain the 'interest margin...'" the letter states. The interest margin is what pays the operating costs and at present there is not enough money coming in to cover the operating expenses. The credit union is at present operating at a "net operating loss," using money from reserves to pay the operating costs, the letter continues.

Complicating the issue is a fee being assessed to member banks by the NCUA to cover the losses of failed credit unions across the country. Each member credit union is being assessed by a 10-year fee. Three years into this 10-year assessment, Woodlands has paid $489,168 for losses that have nothing to do with Woodlands.

The Woodlands Board of Directors looked at two options initially. The first was to do nothing, which would not have solved the new operating loss issue and might have led to more drastic action later.

The second was to look internally at possible areas to save and that is what the board initially voted to do. It would have meant cutting staff, lowering deposit rates, increasing fees, raising loan rates and possibly closing a branch, probably Gorham.

That plan was to have started being implemented July 2012. It would have meant the loss of at least five jobs (seven if Gorham was closed) and would have saved $350,000. Because that still wouldn't have been enough to cover operating costs, the board decided to consider proposals from several other credit unions interested in merging with Woodlands. The board felt North East Credit Union was the best fit. It allowed members to keep all the services they have, plus new ones that, the letter states, members had requested.

Among them would be: business services (commercial accounts for local business owners), investment and insurance services (including retirement planning), a 24 hr. call center, $500,000 of deposit insurance. mobile banking (with smart-phone applications for Android and iPhone), remote deposit capture (taking a picture of your check to deposit it electronically), financial aggregation software to combine all financial activity in one place, 10 more branches throughout the state, a better employee benefits package for the staff, and cost efficiency gains; enough to solve the net operating loss situation immediately.

One of the main concerns in Woodward's letters was the loss of jobs. Collia's letter explains if the merger is approved seven jobs will be lost because of job duplication. Initially it was 12, but it was determined five jobs now done in Portsmouth could be done in Berlin, so those jobs will be moved here. It would be almost a year, in August 2013, before those job losses would be expected to take place. The letter noted if the merger were not approved, five would lose their jobs, possibly seven if Gorham was closed, under option two.

The letter also addressed the loss of control. Woodward said she believes Woodlands members will only have two members on the merged board. In his letter Collia noted that when Upper Valley Community Credit Union merged with Woodlands a year ago, it lost control with just one of nine members on the board. He said Woodlands makes decisions based on the best interests of all members not by number of board members.

The recent letter did not address questions about how the vote would take place, but in an email to the Reporter, Collia said once approvals from NCUA and the N.H. Banking Commission were received, Woodlands would have 60 days to schedule a vote and hold a special meeting. Members will get a meeting notice and voting ballot. They may either send their ballot to Woodlands' audit firm, BerryDunn in Portland, Maine or they may bring it to the special meeting, at which time they will be able to ask questions, and vote there.

It also did not address a one-time dividend payout members will receive. A previous letter did say it would be by a "pre-determined patronage formula" and that information on that would be provided in the voting packet members receive.

On the Woodlands Credit Union website there is a section on frequently asked questions. It states when implementation of the merger is complete, sometime in late 2013, there may be changes to some customer services, including the need for new checks and possibly new checking account numbers, also possibly some changes in debit and credit card numbers, and other services, such as direct deposit, online banking and bill pay.

Salmon Press
Martin Lord & Osman
Varney Smith
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