Two credit unions in prince Edward Island are about to do what no credit unions in the island province have done during the past 20 years — merge.

Evangeline Credit Union, with offices in Tyne Valley and Wellington, and Central Credit Union Ltd. in O’Leary are currently presenting a merger proposal to their respective boards of directors. If approved — as is anticipated — members will then have their say.

With this final endorsement, the two credit unions would open under a yet to be determined banner on Jan. 1, 2011, says Alfred Arsenault, general manager of Evangeline Credit Union.

This merger would mark the first time in two decades that credit unions in P.E.I. have joined forces. From 1989 through 2009, the number of credit unions on the Island — 10 — has remained constant.

That is not true for the rest of Canada, where mergers have been common and there has been a marked decline in the total number of credit unions.

In British Columbia, the number of credit unions has declined to 46 from 114 during the same 20-year period; in Ontario, the drop has been even more pronounced, to 153 from 636. Only P.E.I. has remained in neutral growth while every other province lost credit unions.

“It is extremely unusual in P.E.I. [to merge] because we work together very closely,” says Arsenault. “We share a lot. That’s different than what happens in other communities. We avoid competing.”

That close working relationship is what has led to the recent merger talks. The current manager of Central Credit Union, Roger Young, is looking to retire.

Credit union managers on the Island meet monthly — another unique feature of P.E.I., Arsenault notes — and Young’s impending retirement opened the door this past spring to discussions beyond life on the links. Says Arsenault: “This got [us] to think outside the box.”

Such thinking is not unusual, says Bob Leshchyshen, director of corporate development with CHF Investor Relations in Toronto and a research analyst who focuses on credit unions: “Generally, credit unions merge to achieve economies of scale. However, many mergers or amalgamations occur because the smaller credit union is not able to continue due to lack of qualified directors or management.”

In this case, the bottom line is also top of mind. Says Arsenault: “A lot of services the credit unions require are geared toward larger credit unions.”

There is often a flat fee charged for such services as information technology, he notes — and both credit unions would be required to pay that fee. For smaller credit unions, those fees, often in the tens of thousands of dollars, can be burdensome.

“It seems that it is more and more difficult,” says Arsenault, “for smaller credit unions to survive.”

Evangeline Credit Union has approximately $70 million in total assets under administration, 21 full-time employees and 5,500 member accounts. Central Credit Union is smaller. Combined, Arsenault says, the two credit unions would have AUA of roughly $110 million — and there would be an opportunity for growth. Evangeline Credit Union has basically reached the saturation point, but AUA at Central Credit Union have declined, so there is potential for growth.

There would also be enhanced opportunities for staff, Arsenault says: “[Merging] allows you to get more expertise in your staff.”

The due diligence around the merger has been done and the business plan is complete. Now, it’s just a matter of counting the votes. IE