In a bid to offer improved products and services to its members while adding to its own bottom line, Duncan-based Island Savings is looking into joining forces with the province’s third- largest credit union.
The boards of Island Savings and Fraser Valley-based First West Credit Union, which boasts about $7.1 billion under administration and 171,000 members, have entered exploratory discussions to have the Island firm join First West.
“We believe the timing is right to look ahead at opportunities to strengthen our future while building on our strong foundation for the benefit of our members, our employees and the communities we serve on the Islands,” said James McKenzie, board chairman of Island Savings.
In an interview, Island Savings CEO Rod Dewar said the merger is all about the long-term health of the financial institution.
“The economy has been pretty predictable over the last few years and, in the banking world, margins are quite tight. We don’t see significant changes in the near term, so we asked ourselves how do we thrive?” said Dewar. He noted the industry has been hit by increased costs of regulation as a result of the financial crisis that hit home in 2008.
“More regulation and reporting requirements cost money and technology and that puts pressure on costs while trying to grow your top-line revenues,” Dewar said. “We looked to where we could create scale and develop new products and services for our members while keeping our brand and employees intact. The First West model allows that.”
Under an agreement that has been under discussion for the last five months, Island Savings, which has more than 100,000 members and $2.8 billion under administration, would retain its local brand, local leadership and Island community focus.
Island Savings members would also benefit from new products offered by First West, while Island-based businesses would benefit as the merger would mean access to larger financial resources.
“We are required to have a certain amount of capital on hand to protect loans, which creates a lending cap, but when we join First West that cap will more than double,” said Dewar. “It opens up a whole new range of customer we can talk to and allows us to keep growing with our current customers.”
Shawn Neumann, board chairman at First West, called Island Savings like-minded and said there are clear parallels between the companies.
“[They share] our perspective that co-operative banking should be about creating real value for our members and being the best option for British Columbians who know the value of banking locally,” he said.
According to a statement, there will be no branch closures, as there is no overlap in locations, and there will be no staff layoffs as a direct result of the potential merger.
Dewar said he doesn’t expect much backlash from the membership over this merger proposal, noting it’s very different from the merger of Pacific Coast Savings and Richmond Savings that created Coast Capital Savings in 2000.
“The circumstances are quite different. We will retain our name. We will retain all jobs on the Island that currently exist. The First West model provides a significant amount of independence, and local decision-making will stay on the Island,” said Dewar. “Once that is understood, the membership will take some comfort with that.”
Before finalizing a merger arrangement, the credit unions will undertake due diligence and seek regulator consent. The transaction will also require a vote from the Island Savings membership, which will take place in early 2014.
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