Community Savings balks at bank’s buy-out

By Don Patterson
Staff reporter

Scott Tannas, president of Western Financial Group in High River, made an unsuccessful bid to buy Community Savings. photo submitted

Community Savings has balked at an offer from High River-based Western Financial Group to take over the Alberta credit union.
Western Financial submitted an offer last Thursday to acquire the Red Deer-based credit union, Alberta’s second largest with assets of $2.7 billion, and bring it under the banner of the company’s banking division Bank West.
However, Community Saving’s president believes the offer isn’t in members’ best interests.
“When 94 per cent of our members tell us that it’s important to remain a member-owned credit union, the board has clear marching orders,” said Community Savings president Murray Haubrich. “There is no way the board can take any steps that would cause us to dissolve what we’ve got and replace it with a bank.”
Community Savings’ board of directors considered the offer on Friday and decided not to forward the issue to the credit union’s members in a March 18 special meeting when they are to vote on a proposed merger with two other Alberta credit unions.
Bill Rogers, Western Financial senior vice president of communications, said community Saving’s response was disappointing and this effectively means the end of their bid to acquire the company.
“If they don’t see merit to the extent and vision of our proposal. There’s little point in trying to continue… It’s done,” he said. “We thought this was the perfect opportunity to have Community Savings as a platform on which to build a strong western financial leader.”
Western Financial president Scott Tannas argued his company’s offer would be a favourable alternative to a proposed merger between Community Savings, CommonWealth Credit Union and Edmonton-based Servus Credit Union.
“Our proposal preserves the spirit of Community Savings. It will be Community Savings people from the tellers all the way to the vice-president and all in between, who’ll be running Bank West. It’s those people who will lead Bank West into the future,” he said. “That will not be the case as it merges with two large unions and becomes one-third of a very, very large operation.”
Tannas sought to have the offer included in the March 18 meeting of Community Savings members.
Western Financial’s offer treaded a new, untested path because there have been few cases in Canada where a bank has taken over a credit union.
Tannas said the process would involve a transfer of all assets and liabilities of Community Savings to Bank West, the credit union aspect of the company would be dissolved and members would receive a payout for their Community Savings shares from Western Financial.
“The funds that remain in the credit union – which is basically the built up profits and the members’ contributions and our contribution as a premium for value – would then flow back to members as a cash payment,” said Tannas.
Under Western Financial’s proposal, not only would Community Savings’ loans and deposits be transferred to Bank West, but also employees and executive.
Western Financial is a large player in western Canada’s insurance industry, but doesn’t have much of a presence in the banking sector. Community savings has 625 banking employees, whereas Western Financial has just 25 employees in its banking division compared to 900 in its insurance operations.
If approved, the move would give Western Financial more than 500,000 customers across western Canada, 1,500 employees and 107 branch offices.
“On our balance sheet, and in our financial side, it is an enormous transaction for us. In the banking business you need a lot of capital and Community Savings, on the capital side, is much larger than Western Financial Group even though we have more customers, more employees and so on,” said Tannas.
Haubrich said the proposal would have to include three elements to be considered: Community Savings must remain as a credit union, member deposits would need to be fully guaranteed and the bank would have to be cooperatively controlled under democratic principles.
“Community Savings has to remain a credit union. That’s what we are and we’re not about to change it at all,” he said. “Their proposal is to change us into a bank, a chartered bank.”
As well, Haubrich said profits would have to be shared with members. Presently, Haubrich said Community Savings gives $40 million per year in profits to its members, and if Western Financial bought the credit union those funds would go to the company’s shareholders instead.
Haubrich suggested the proposal could even go against the Credit Union Act.
“Our board members don’t even have the authority to recommend to our members that we no longer be a credit union. We’re governed by the Credit Union Act, we’re not governed by the Chartered Bank Act,” he said.
According to Haubrich, the proposed merger between Community Savings and two other Alberta credit unions would have more benefit to members.
“What we’re looking at doing, as a company, is expanding our service network, fundamentally tripling our size and, more importantly, tripling our capital base to make us a much stronger entity,” he said.