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Rock solid

Uniting credit unions in the Atlantic provinces one step at a time

Atlantic central credit union

As Bernie O’Neil completed his final days on the job, the affable 69-year-old left Atlantic Central on March 1 with some measure of confidence that his work as founding CEO was complete.

His last task for the Canadian credit union system was formidable: to forge a “business combination” of four provincial centrals into one regional body so that Atlantic credit unions can better compete with the big players in today’s financial services industry.

Two years on and the merging of operations is now complete. Atlantic Central is moving into a new phase and O’Neil believes it is better positioned to address systemic weaknesses of the credit union movement in the Atlantic provinces.

“I think it’s the right time for me to leave and the right time for a new person to come in,” says a philosophical O’Neil, who started his career in the credit union system in 1966 at Cape Breton’s $24-million Princess Credit Union in Nova Scotia. “They can focus on the future, and they have a very good blueprint from which to move ahead.”

The joining of the centrals in New Brunswick, Prince Edward Island, Nova Scotia and Newfoundland and Labrador into one headquartered in Nova Scotia comes at a critical juncture for the region’s 58 credit unions. Market share, estimated between five and seven percent, is declining. So too is membership, currently hovering around 330,000. System assets are stable at $4 billion, but low interest rates are pinching profits and high operating costs are further cutting into the bottom line.

The joining of the centrals in New Brunswick, Prince Edward Island, Nova Scotia and Newfoundland and Labrador into one headquartered in Nova Scotia comes at a critical juncture for the region’s 58 credit unions

The challenges faced by credit unions in the four provinces are not unfamiliar to other credit unions across Canada. However, since being formed on January 1, 2011, Atlantic Central has taken concrete steps to prepare a foundation for Atlantic credit union success.

O’Neil says the merging of operations into one regional body has resulted in savings to member credit unions of $1.8 to $2 million annually. Service charges are also generally lower, and the larger central is able to offer a greater array of products, services and expertise that support more consistent and cohesive branding across the region.

It is a foundation, for sure. One built on a common vision of system leaders who were finally able to overcome parochial ambitions for the broader needs of Atlantic credit unions and their members.

A warm welcome

Nova Scotia Finance Minister Maureen MacDonald is a self-described fan of the credit union system, having been a member since her grandfather opened an account for her when she was just three.

Her ministry regulates the credit union system and she believes the new, bigger central offers significant benefits to credit union members who can enjoy a broader suite of services and products through the expanded network. “I think that having a larger and more diverse organization brings cost savings and it also means it will have the critical mass that will strengthen the credit union movement in this region,” she says.

Louis Shea, CEO of the $123-million Tignish Credit Union on Prince Edward Island, says credit unions and centrals have contemplated a single Atlantic central for the last 20 years. “People would talk about it and then it would get dropped and we’d all go our merry way,” says Shea, who serves on the board of directors at Atlantic Central. “But everyone realized it was inevitable, and that we had to do it.”

Shea muses about even further system consolidation, citing the success of the Desjardins Group model. “If we could put the whole system together, we could do things so much better.”

Overcoming the initial hurdles

O’Neil says the early challenges of combining operations were typical of any similar endeavour. The task centered on building one cohesive management team that could begin the work of merging operations, while attempting to ensure that credit unions encountered no service interruptions.

The impact on individuals was significant, says O’Neil. No person lost a job in the merger, but not everyone retained the same position.

“There is fear, there is apprehension, there’s uncertainty,” says O’Neil. “The development of a management team poses challenges and disappointments for some people. One has to deal with that.”

An additional challenge for Atlantic Central was getting board members from four provinces to become comfortable with one another, with their respective roles and with the philosophy and goals of the new central.

The make-up of the board could have been a stumbling block. Nova Scotia, leading the Atlantic region with almost $2-billion in assets and 30 credit unions — about the same as the other three provinces combined — holds six seats while the others hold two each.

Given the size and service offerings of the former Credit Union Central of Nova Scotia, it made sense that it became the home of the new central. But credit union worries in other provinces about autonomy and parity couldn’t be dismissed.

After a time of working together, O’Neil says board members from the different provinces found “they had a lot more in common than one might think at the outset” and put aside differences to draft a plan that benefited the entire region.

Perhaps the most daunting challenge for the new central was convincing Atlantic credit unions of its value. To that end, the board of Atlantic Central struck a Roles and Responsibilities Committee in Spring 2011 that led an exhaustive, 18-month consultation with credit unions. It had three goals: to educate credit unions about Atlantic Central; to determine current credit union priorities and challenges; and to assess their expectations for Atlantic Central going forward.

Last October, the Committee tabled 82 recommendations, all of them accepted by the board as a blueprint for future work to be conducted under a new CEO.

The consultation process, coupled with the board’s response, has created some goodwill throughout the region, not to mention a far better understanding of how Atlantic Central intends to lead the system.

The value of a central

George Greenwood is CEO of the $135-million Advance Savings Credit Union in Southeast New Brunswick. He believes Atlantic Central’s biggest impact on his operation has been the wide array of consulting expertise that he can access with a simple phone call.

Strategic planning, marketing, treasury expertise and research are critical services that are now available as part of a harmonized brand to all credit unions in the Atlantic region

Strategic planning, marketing, treasury expertise and research are critical services that are now available as part of a harmonized brand to all credit unions in the Atlantic region. “There is great value from a dues perspective to have access to these services,” says Greenwood.

Tignish’s Shea says he appreciates the fact that if he needs assistance or advice, he can talk directly to the person who can answer his questions — a timesaver for small credit unions that struggle with ever-increasing government regulatory demands and paperwork.

Tignish Credit Union — the town’s only financial institution serving 1,500 families (a second branch is located in Alberton in the Western part of PEI) — has also used Atlantic Central for strategic planning and facilitation, and Shea says they make sure you get what you paid for. “They also don’t charge for travel, and so there is a big savings for the most remote credit union.”

Credit unions have also applauded the financial side of the new central’s offerings. “They have tried to move to a more competitive pricing model with our products,” explains Ken Shea, CEO of the $367-million East Coast Credit Union with more than 30,000 members throughout Nova Scotia. “There’s also been more focus on trying to get the best price on deposits.”

One data company for the region saves backroom costs, he adds, and central ownership of League Savings and Mortgage means better management of system and credit union liquidity through off-balance sheet mortgages and term deposits.

Nova Scotia’s Shea also likes the fact that the larger central has more clout in the loan syndication business as central coordination makes it easier for all four provinces to be involved in bigger deals that bring even greater benefits to individual credit unions.

And, he’s grateful for what he describes as last year’s rebate to credit unions — “record distributions that were partially enabled by some of the cost savings and the central focusing on the right things.”

Baby steps

Still, the new central is not without growing pains. Communications to member credit unions may well be an ongoing challenge because of the sheer size of the region.

For example, Tignish’s Louis Shea says PEI credit union managers meet monthly, and it used to be that the CEO of the former PEI Central would attend as well. While the monthly manager meetings still occur, participation by the Atlantic Central CEO is less frequent under the new model.

Atlantic Central addressed that issue by developing an extranet site called cuZone — an information portal that provides credit unions with updates about products and services as well as marketing and branding information. Credit unions can subscribe to RSS feeds that deliver email notifications of new information they need. Advance Saving’s Greenwood calls cuZone a fantastic resource for Atlantic credit unions.

Nova Scotia’s Ken Shea says credit unions haven’t yet seen a huge impact on the customer side of the service equation. But he expects future investments in technology and expertise by Atlantic Central mean credit unions won’t have to bear those costs alone — and that will pay dividends that credit unions have yet to reap.

Challenges for a new successor

O’Neil says his successor will have to take on a number of challenges that are faced by the entire Canadian credit union system. These include high operating costs, squeezed financial margins and an economic environment of low interest rates, and increased competition.

Key to addressing those is what O’Neil calls a “truly unified system approach,” not unlike the Desjardins model cited by PEI’s Louis Shea. This model makes sure that virtually all aspects of a system’s service delivery — from backroom operations, banking systems, marketing and branding initiatives, and consumer product and service offerings — are harmonized.

Consolidation to that level is likely many years away, but Atlantic credit unions seem prepared to discuss and promote solutions that benefit the entire region.

“I know I can’t by myself create the structural and technological changes to make us relevant,” says Shea. “We try to do things to enable credit unions to succeed as a group as well as individually. We’re only as good as our weakest link.”

“We try to do things to enable credit unions to succeed as a group as well as individually. We’re only as good as our weakest link”

—Ken Shea, CEO, East Coast Credit Union

There is always going to be the fear that credit unions are going to lose their autonomy and voice, adds Greenwood. But this is a short-sighted view. “It’s a board of Atlantic Canada, looking out for the best interests of Atlantic Canada,” says Greenwood. “It will still make tough decisions, but the board’s going to do the best thing for the system, not just for Nova Scotia, New Brunswick, PEI or Newfoundland and Labrador.”

O’Neil, reflecting on his two-year mission at the helm of Atlantic Central, feels the time is ripe for a new person to take charge and lead the region into the next phase of its evolution. Given the “regional think” happening at both the board and credit union level, he’s optimistic about the future.

And, he sounds relieved to have survived the trenches of a “business combination” that appears to have won over a good number of credit unions in the Atlantic system. He chuckles at this no small feat, joking, “I’m still in one piece.” ◊