In my 32 years as SAFE President and CEO we completed a number of mergers. Credit union combinations can be pursued in response to weaknesses, and they can be strategic combinations that take advantage of scale to create increased member benefit. In each of the mergers we completed, we saw significant member benefits and improved credit union performance.
The proposed SAFE Credit Union and BECU combination is a strategic move that takes advantage of scale to create increased member benefit. SAFE is financially sound, has a high level of member satisfaction, and provides major benefits to the greater Sacramento region. So why combine with BECU?
I can answer that question by pointing to the facts that convinced me to support the combination. For someone who has so much invested in SAFE Credit Union, I looked very deeply into the facts before I made my decision. My standard for deciding on the combination was to determine what course will create the greatest value for members, the greatest opportunity for employees, and the greatest benefit for the Sacramento region.
I believe that scale should serve members.
When I first joined SAFE, the credit union had about $70 million in assets and four offices to serve members. When I retired in 2016, SAFE had grown to over $2.5 billion in assets and 21 offices to serve members. The number of member services had grown, and technology allowed for round-the-clock service for members anywhere at any time. I know very well that scale isn't about asset ranking. As scale increases two things happen: one is that you can lower your unit costs, and secondly you can therefore afford to add more services because you have the member base to support those services. The BECU combination creates an organization that is 7 times bigger than SAFE alone, and with that growth comes significant economies of scale.
That scale allows the combined BECU/SAFE organization to increase SAFE's annual "Return to Member" value by more than 30% - from about $47 million to $63 million. Return to Member is the financial benefit realized by members due to paying less in fees and earning more, and therefore keeping more of what they earn.
The improved Return to Member value will be realized with the combination through fewer fees, including the expected elimination of monthly account service fees and certain Non-Sufficient Funds (NSF) fees, automatic loan repricing to a lower rate for eligible members when their credit profile improves, premium interest rates and higher yields on select accounts through BECU’s Member Advantage Program, greater capacity to make consumer, mortgage and small-business loans, and faster adoption of digital tools and security protections.
The benefits of scale are specific commitments, and performance will be measured against those commitments.
Service is more than pricing
I believe the essence of SAFE is personal service. Rates and fees are important, and will be competitive, but it is personal, professional, and timely service that sets apart the best credit unions. SAFE's growth, member surveys, member comments, and mystery shopping scores all demonstrate that SAFE’s member service is excellent.
Similarly, BECU is nationally recognized as a leader in member service. BECU carefully monitors member satisfaction with a rating system called Net Promoter Score. That score is used by many of the nation's best customer service organizations and BECU ranks among the very best. Member service will remain at the highest levels after a SAFE/BECU combination.
There is often a concern that a combination of this type will result in negative member impacts. The merger agreement addresses and protects against these concerns. Existing SAFE branches and branch hours are expected to continue. The familiar employees will be there to serve members and BECU will retain the SAFE CEO as the person in charge of operations in California. BECU has plans to expand the regional branch footprint. Members will be able to retain their account numbers and continue using their SAFE checks, credit cards, and debit cards, and have easy access to their accounts.
The community impact also continues
SAFE has had a major community impact that extends beyond its payroll, its vendor relationships, its lending for autos, homes and small businesses, and its facilities. SAFE has supported education, financial wellness, arts and culture, regional economic development, and many local non-profits. SAFE leaders and employees have volunteered and given their time to community organizations. During my 32 years as President and now ten years of retirement, I have served on the boards of KVIE, UC Davis Foundation, Sacramento Region Community Foundation, Consumer Credit Counselors, Sacramento Metro Salvation Army Advisory Board, Sacramento Philharmonic and Opera, Office of Wellness Education at UC Davis, and the Sacramento Choral Society and Orchestra. I was one of many employees who volunteered in the community.
One of the major reasons I support the combination with BECU is that the SAFE community outreach budget will increase by about three times, based on an amount per member calculation used by BECU to budget community outreach. SAFE has already ranked highly in the Business Journal's list of philanthropic local companies. This combination will help further increase that philanthropic impact.
A decision from strength
In addition to being SAFE President and CEO, I served on the Board of a $30 billion dollar credit union, including as Chairman of the Board. I know it is the fiduciary duty of the Board to protect the welfare of the credit union. In order to do that, Board Members must consider the future environment, the resources needed to operate, the sources of those resources, and how the credit union will increase member value.
SAFE's Board has done its fiduciary duty – it has maintained a safe and sound credit union with a high level of member service and value. It is in a position of strength.
The decision to seek a partner and to combine with BECU is a logical way to accelerate the progress needed to prepare for the future, while taking advantage of economies of scale.
Members are asking why now; why does this make sense? I asked those same questions, and I am confident that the combination is a wise and logical way to accelerate doing the things that SAFE would have to do on its own to prepare for the future. The combination achieves change more quickly and at a lower cost than if SAFE proceeded without a combination.
SAFE is governed by members; one member has one vote, regardless of their share balance. Your vote will determine whether this combination will be approved and completed. And if the two credit unions combine, your rights as a member, and your ability to vote, will continue as before. I ask that you become informed, cast your vote, hopefully stand for election to the Board, and continue to provide member governance and control of your credit union. I support the combination.
