Management

The CFO’s Merger Role Expands

CFOs are expected to take a leadership role in the merging CUs’ cultural transformation.

April 20, 2012
KEYWORDS asset , credit , earnings , merger , ratios
/ PRINT / ShareShare / Text Size +

In the past, the CFO focused solely on financials during mergers. That’s no longer the case.

CFOs today are expected to take a leadership role in the merging institutions’ cultural transformation, including educating staff and modeling behavior. This requires solid people skills, according to “The CFO’s Emerging Merger Role,” a white paper from the CUNA CFO Council.

During the merger process, the CFO must communicate with small and large groups about specifics. This makes it important for the CFO to develop and cultivate relationships.

They also must watch for red flags raised during due diligence, says Scott Waite, senior vice president/CFO for $3.6 billion asset Patelco Credit Union in Pleasanton, Calif.

“Looking at certain ratios will tell you whether it is even worth taking it to the next level,” he says. “By examining these ratios you’ll be able to see if the acquired credit union is holding, losing, or gaining ground.”

Important measures to consider, Waite says, include loan performance over time, the movement of the charge-off ratio (whether it’s increasing or decreasing, or lower or higher than the market rate), current delinquencies, net interest margin, yield on assets, cost of funds, operating expenses to average assets, and net worth.

The CFO will need to assess the one-time costs and the effect of earnings depletion now and down the road to determine the benefit of merging.

Other merger-related concerns to address:

  • What will be the diluted effect of capital?
  • What’s the forecast and effect of future earnings?
  • Is the acquired credit union a business that can make a profit?
  • If it’s a credit union that has financial problems, is the acquired credit union losing money and will it continue to lose money after the acquisition?
  • What’s the financial risk on the balance sheet of acquiring the credit union?
  • What are the financial targets for the new credit union for the next three years? What are the projected earnings for the next three years?

Credit unions must recognize that the combined balance sheets will be a driver for the new organization for a long time. Mergers can be successful if they reduce cost—and that usually means reducing staff.

White papers are available free to CUNA Council members; $50 for nonmembers. Click here to learn more.

Post a comment to this story

heroes

What's Popular

Popular Stories

Recent Discussion

Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory (www.appreciationatwork.com/assess) will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

Your Say: Who should be Credit Union Magazine's 2014 CU Hero of the Year?

View Results Poll Archive