Alliance, Blackstone River credit unions merging

On most days, Joseph J. Cicione III knows nine out of 10 customers who walk through the doors of Alliance Blackstone Valley Credit Union.
At a little more than $44 million in assets, Pawtucket-based Alliance is one of Rhode Island’s smallest credit unions, and its members like that personal connection, says Cicione, Alliance’s CEO.
But being so small has its downsides, too. Having so few resources makes it difficult to compete in a marketplace that includes mammoth Pawtucket Credit Union and Navigant Credit Union, as well as a lineup of banks.
Cicione says that’s part of the reason why alliance is merging with Blackstone River Credit Union in Woonsocket, an institution with a similar lineage that has slightly fewer assets but more members.
Both credit unions have agreed to combine efforts in northern Rhode Island to ease the cost of complying with more stringent government regulations, as well as offer more products and features to an ever-demanding membership.
The merger officially takes place Sept. 30 and is the second involving credit unions announced in Rhode Island in recent months. In March, Warwick-based Wave Federal Credit Union agreed to absorb tiny Cottrell Credit Union, a $3 million institution in Westerly.
Some analysts have forecast that new financial regulations passed by Congress will lead to more consolidation among banks. But local representatives of the credit union industry weren’t so quick to make that prediction for credit unions.
Robert Kimmett, senior vice president at the Credit Union Association of Rhode Island, said the two Rhode Island mergers aren’t necessarily a signal that more of these deals are in the offing among the state’s remaining 22 credit unions, although he added, “Certainly, the possibility exists.”
Smaller credit unions, particularly those with fewer than $100 million in assets, will be under pressure to comply cost-effectively with new government regulations, industry representatives said.
At Alliance, for example, Cicione said he already serves double duty as the credit union’s compliance officer in order to keep expenses down. But that job will get that much harder with the new rules.
One of the pending changes that Cicione said could put pressure on the tiny credit union is limiting the amount of debit-card fees collected from merchants by banks and credit unions. The measure has been the focus of an intense effort by banking groups to have it overturned. But while banks turn a profit on those interchange fees, Cicione said, “We do it for the ability to not charge our members for checking accounts.”
Alliance and Blackstone River executives said the consolidation will lead to savings – although they insist there will be no layoffs and no branch closures – and will enhance product offerings.
“We deal with a lot of the same regulations, the same headaches that take up a lot of time and energy – ergo money,” Cicione said. “Now we’ll deal with those headaches together.”
The merged entity will offer a changed product line. Alliance did not have a home equity line of credit product, but Blackstone River does. At the same time, Alliance has a history of making commercial loans, Blackstone River doesn’t.
Cicione said the combined capital base will allow the reorganized credit union to raise its commercial loan limit from $700,000 to $1.3 million.
For all of Cicione’s concerns, Alliance finished 2010 in the black, posting $342,876 in net income. It finished the 2011 first quarter with another $105,805 in profit.
Blackstone River, however, posted a $3,354 loss for 2010, and lost another $34,420 in the first three months of 2011.
Both credit unions had similar beginnings. Alliance got its start in 1948 as the financial institution for the Pawtucket Teachers Alliance, while Blackstone River was chartered as the credit union for Woonsocket Teachers Union members.
Both eventually became federally chartered and could accept members beyond union members. Alliance has about 3,800 members, the majority of whom are teachers; Blackstone River has 4,796.
Because of the similar background and size, joining board members of each credit union through a merger would make sense, Cicione said.
A merger committee decided that Alliance would be the “continuing credit union,” absorbing Blackstone River. The same committee selected Cicione as CEO of the consolidated credit union while Blackstone River CEO James Wood would become executive vice president.
In one of the last steps of the merger, 97 percent of Blackstone River’s membership voted in favor of the move last month, although at a special meeting, some Blackstone River members raised concerns about a change in customer service, such as branch closures and layoffs.
Cicione insisted that staffing would not be reduced. &#8226