Important Member Communication

July 14, 2021

As you may recall from my Chairman’s Notes for the first quarter of 2021, Utilities Credit Union faces several challenges as we look to the future and the needs of our member/owners.  Utilities Credit Union is experiencing the same issues that have caused many other small credit unions to either partner with other institutions or cease to exist. The challenges include increased regulatory requirements; the high cost of technology to meet member expectations; and an environment of smaller interest margins leading to decreasing net income from which dividends are paid to members’ share savings.
In early fall of last year, amidst the pandemic, it became apparent to the Board of Directors that Utilities Credit Union could not sustain its operation in the same manner it has for almost 90 years.  At that time, a committee was formed comprised of Directors, staff, committee members, retiree members and a financial consultant. This committee was charged with determining which option of the three listed below would be the best option for UCU members.
1. The credit union can attempt to implement changes that will reduce the cost of operations while meeting the expectations of our members; or
2. Liquidate the credit union. (Liquidation means a credit union has been closed; our regulatory agency’s Asset Management and Assistance Center oversees the liquidation and sets up an asset management estate to manage assets and to recover value from the closed credit union’s assets. All verified member shares are typically distributed within five days of a credit union’s closure); or
3. The credit union can merge with another credit union.
Throughout the fall the committee met frequently to perform due diligence studies on each of the three options. Early on it was determined that the first option of implementing changes is not feasible. While UCU is financially stable with a strong capital position, operationally the challenges are too great. Also, it was agreed that liquidation would not be in the best interest of our members. Liquidation felt like an abandonment of our members and would deprive them of options for their financial needs. The third option, to partner with a strong credit union that could work with the membership to provide products and services they value was the preferred recommendation.
The committee identified five very strong contenders as potential merger partners. The initial vetting process eliminated three of these organizations, leaving a manageable two for in-depth study. The committee, now referred to as the Merger Committee, conducted numerous personal interviews with the President/CEOs, their staffs and directors to find the right fit. They also reviewed the candidate credit unions’ operational statistics, product offerings, philosophy and specific financial impacts to UCU members. Our highest priority throughout this process has been to ensure that our loyal members will continue to receive the same quality personal service that you deserve.
By a unanimous Board vote in April, Royal Credit Union in Eau Claire was selected as our Merger Partner.  As many of you know, Royal Credit Union is a strong financial institution with a history that is quite similar to that of UCU, as Royal was started by a group of employees within a company in 1964.  The Merger Committee found that Royal’s core purpose of creating a positive impact in the lives it touches was consistent with UCU’s own philosophy and values, and noted that Royal has an excellent reputation in the communities it serves.  Royal Credit Union has completed mergers in the past and is positioned to use that experience to ensure an easy transition for UCU members.
The Merger Committee also felt that the convenience and choice offered by the combination of Royal’s physical locations and digital tools would best address changing member expectations around technology and access to accounts and services.  Royal Credit Union serves members from 22 office locations across West Central Wisconsin and the Twin Cities Metro in Minnesota.  Royal has a strong online presence, with a robust website plus a modern online banking and mobile app experience.  You are welcome to explore Royal’s website at www.rcu.org to review their competitive product and service offerings.
The Utilities Credit Union Board of Directors is seeking the support of our members in this important matter by putting it to a vote.  The proposed merger must have approval of a simple majority of the members who vote.  A special virtual meeting of the Utilities Credit Union membership will be held by phone/video conference on Thursday, September 9, 2021, at 4:30 p.m. CST.  This meeting will allow all members to ask questions, provide feedback, and vote on the recommendation to merge with Royal Credit Union.  Royal Credit Union’s President and CEO Brandon Riechers will be present at this meeting to address your questions.  Please refer to the enclosed Frequently Asked Questions document for more information.
It has been my pleasure to serve the UCU membership.  I fully support the recommendation to accept Royal Credit Union as our merger partner.  It is my goal to create a smooth transition to Royal Credit Union, enhancing product and service offerings while maintaining the quality service you have come to expect!
Sincerely,

John R. Ness
Chairman, UCU Board of Directors

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