DPS Credit Union and Safeway Rocky Mountain Credit Union, fresh off their recently completed merger, want to add a third partner to the mix – Gateway Credit Union.
“This is going to create the third-largest credit union in the state,” said John Dill, president and chief executive of the Colorado and Wyoming Credit Union Leagues. “This is the right thing for their members. The increased size is very likely to provide more and better services.”
Only Ent and Bellco will be larger than the combined credit unions, which would have $890 million in assets, 76,400 members and 10 locations.
Two-thirds of Gateway’s approximately 21,000 members must approve the merger in a vote scheduled for June. Regulators must give the final nod for the state’s largest credit union merger to take place. It is tentatively set for October.
The boards of both credit unions have approved the merger, and no layoffs are expected among the 250 workers. The Denver law firm of Semple Miller Mooney & Farrington served as legal adviser.
DPS and Gateway have already struck a management agreement that puts DPS chief Alan Peppers in charge as CEO and president of both credit unions.
“While we are going through the approval process for merger, we can begin to implement changes to serve our members better,” Peppers said.
That includes adding product lines, such as home and commercial mortgages, that Gateway lacks. DPS is testing four potential new names, which it didn’t identify. The separately branded credit unions will take on the new identity next year.
As cooperatives, credit unions can’t access capital markets easily and must finance expansions through the income they generate. By merging, DPS can expand without making a large investment of money.
“If we wanted to add five new branches, it could take five years,” Peppers said.
Gateway traces its roots to the old Lowry Federal Credit Union, which started in 1951. The credit union expanded its field of membership to include all people who work or live in Aurora in 1993 after the Air Force decided to close Lowry.
Like other credit unions, Gateway has struggled with increasing competition in the financial services area, rising interest rates and members under financial stress.
“It is not easy being midsized,” said Charmayne Sobon, who headed Gateway before Peppers’ arrival. “We are pretty flat right now.”
As of June 30, Gateway lost $732,556 on assets of $179 million on an annualized basis. DPS, by contrast, earned $4.6 million on $566 million in assets, according to the National Credit Union Administration.
“Institutions are searching for the ever-elusive economies of scales, and customers are continuing to demand new services,” said David Francis, acting commissioner of the Colorado Division of Financial Services, which regulates state-chartered credit unions.
Gateway maintains adequate capital despite its recent losses, Peppers said.
The key to a successful merger will be to leverage the benefits of size without losing the personal touch that makes credit unions attractive to their members, Peppers said.
“The size helps provide resources, but size doesn’t make you good,” he said. “We don’t want to forget why we are here.”
Staff writer Aldo Svaldi can be reached at 303-820-1410 or asvaldi@denverpost.com.
