How Credit Union Leaders Can Master Bank Acquisitions

Acquiring a bank is no small feat, and when two credit union CEOs with over three decades of experience in the industry sit down to discuss their journeys, the insights are invaluable. In this episode of the ACT Advisors podcast, Doug English interviews Bob Steensma, CEO of Five Star Credit Union, and David Southall, CEO of Innovations Credit Union. Both leaders share their strategies, challenges, and lessons learned from navigating bank acquisitions.

From these conversations, credit union executives can glean actionable tips for evaluating acquisitions, integrating teams, and ensuring a smooth transition for employees and customers. Read on for the key takeaways, and don’t miss the full episode for more in-depth advice.

The Journey to Leadership in Credit Unions

Both Steensma and Southall began their careers in the credit union industry over 37 years ago, starting from entry-level positions and working their way to the top. Their shared experiences underscore the unique challenges and rewards of the credit union movement, from grassroots community service to strategic growth initiatives.

Steensma’s tenure as CEO spans 20 years, with his current role at Five Star Credit Union marking 17 years. Southall has been CEO of Innovations Credit Union for 20 years, with a career that started as a teller and progressed through various leadership roles. Both CEOs credit their success to strong teams and a commitment to their organizations’ values.

How Credit Unions Can Strategically Approach Bank Acquisitions

Bank acquisitions are complex, requiring a combination of financial, cultural, and operational considerations. Here are the major takeaways from Steensma and Southall’s experiences:

Evaluate the Financial Feasibility

Before pursuing an acquisition, it’s essential to determine whether it makes financial sense. Both CEOs emphasized the importance of assessing the bank’s financial health and alignment with the credit union’s strategic goals.

Steensma: Five Star focused on due diligence and careful pricing. “We’re spending members’ money here—it’s not our money. The math has to work.”
Southall: Innovations acquired a bank flush with cash, which complemented their lending-focused culture. “It gave us the liquidity to be more aggressive with lending.”

Prioritize Cultural Alignment

A mismatch in organizational culture can derail even the most financially sound acquisitions. Both CEOs stressed the importance of understanding the culture of the acquired institution and its compatibility with the credit union’s values.

Steensma: “Culture is huge in these transactions. Some banks are closed off, making it harder to gauge their culture upfront, but it’s critical to get it right.”
Southall: Innovations’ acquisition was successful partly because the bank’s leadership valued employee retention and aligned closely with Innovations’ community-focused approach.

Address Employee Retention Early

Acquisitions can create uncertainty for employees, making it vital to communicate transparently and provide reassurances about job security.

Steensma: Five Star faced competition from other banks vying for their acquisition targets’ employees. “The vultures come out when deals are announced. You’ve got to be proactive in retaining talent.”
Southall: Innovations retained all employees, a priority for the bank’s former owner. “Keeping everyone on board smoothed the transition for customers and employees alike.”

Streamlining the Conversion Process

The operational side of acquisitions, particularly system conversions, can present significant challenges. Here’s how Steensma and Southall approached this critical phase:

Plan for Extended Training and Support

Steensma’s team learned that upfront training wasn’t enough for employees transitioning from long-standing systems.

“We spent twice as much time with one bank post-conversion, staying on-site for a month instead of two weeks. This level of support made all the difference.”

Optimize Customer Authentication

One of the pain points in Five Star’s first acquisition was the authentication process for new debit and credit cards.

“We expanded authentication methods in our second acquisition, allowing more flexibility for members. It was a game-changer.”

Leverage External Expertise

For larger acquisitions, Five Star turned to external help for system conversions, ensuring accuracy and efficiency.

“With thousands of accounts to transfer, we couldn’t risk manual errors. Bringing in professionals for core-to-core conversions was worth the investment.”

Final Thoughts: Make the Right Moves for Growth

Whether you’re exploring your first bank acquisition or refining your strategy, the experiences of Steensma and Southall offer a roadmap for success. As both leaders noted, acquisitions should align with your credit union’s long-term goals, support your team, and ultimately benefit your members.

Ready to dive deeper? Listen to the full episode here to gain actionable advice and firsthand stories from these experienced CEOs.

Bob Steensma and David Southall are not affiliated with or endorsed by ACT Advisors, LLC.

Audio Transcription

[00:00:00] Doug English

Bob Steensma, David Southall, welcome to C.U. on The Show. I’m delighted to have you guys on here. I’m really excited about the content we’re going to capture today. Before we get started, I always like to find out, how did you get started working in the credit union movement? Let’s start with you, Bob, since you’re on my screen.

[00:48:58] Bob Steensma

All right, well, I started, oh gosh, I just had my 37th anniversary in Credit Unions on Saturday, this past Saturday. So, I started at a young age in Northern California and I started as an inexperienced collector, got with a small crediting out there that needed a full time person, and I had a great boss who I still am in contact with today, believe it or not. And, his goal was to teach me something new every day. And it was obviously revolving around collections and, you know, delinquency management and those sorts of things. So, had a ball, worked there for three years, learned something new every day. It was a great, experience for me as a young person. And then I got right into collections management, and, worked for a number of credit unions for credit unions in eight years in California. Doing the collection work. So, and then that took me, to all parts, of the country. I’m now at my ninth credit union, in 37 years. And, I’ve been a CEO now for 20 years of those 37. So, this is my second credit union that I’ve been a CEO at. I’ve been here at Five Star a little over 17 years now. So that’s a brief, update, I guess.

[02:03:66] Doug English

What tenure, what tenure Mr. Steensma. Thank you, Bob. David, let’s hear.

[02:08:23] David Southall

It’s amazing how close in line Bob and I are. I started my career 37 years ago at a small credit union here in Panama City. It was a Navy based credit union. It’s now called Innovations, where we are today. I did take a break for a couple years. I worked for CUNA Mutual Group as an account relationship manager. So, I stayed with the credit union as their representative, but, went back in 2004 as the CEO. So 20 years for me as well. So Bob and I we’re, I didn’t realize how aligned we were in our career.

[02:42:81] Steensma

Neither did I, I didn’t realize that you’d started at innovations.

[02:47:00] Southall

I’ve only worked for one credit union, my whole career. So, I started back in 87, just coincidental. My father was, he was either on the board or on the supervisory committee. I can’t remember which one he served, but he was a volunteer and, I needed a job. So, became a teller and, started out right on the drive through teller, just like a lot of people have done in the credit union careers. And I just worked my way through as head teller, assistant tellers, branch manager, VP of lending. And like I said, back in 2004, I became the CEO. So, we’ve seen a lot of changes. We’ve changed our name, we’ve rebranded, we’ve grown. We’ve done so many things in the 20 years that I’ve been the CEO and I give all credit to my team. I don’t take much credit for myself. It’s all about who you hire and the talent that you have with you.

[03:38:17] Steensma

No question about that.

[03:41:37] English

Well, in 2024, both of you have been involved in acquisitions of banks in your marketplaces or nearby to your marketplaces. So, Bob, tell us a little bit about where Five Star was, before the first acquisition, and then this strategy of, acquiring banks, how did you decide to do that, and what has transpired so far?

[04:06:28] Steensma

Well, I’ll, I’ll focus on the two recent acquisitions we’ve done. For us it’s bank purchase number three and number four. We did two early, bank purchases, the first one was back in 2014 and then we did a second one in 2015. Sounds like we took a little hiatus, about nine-year hiatus between, buying bank number three and number four, but we looked at almost 40 banks during that nine year time to purchase. And for one reason or another, uh, it just wasn’t the right fit, the location wasn’t what we wanted, they wanted too much money. I mean, it, you know, it’s a ton of factors, but bank number three and number four, which we just completed in May of this year, came about through, our relationships, if you will, with, uh, different investment bankers, that are, talking with the different banks in the southeast, about selling.

So , every single acquisition 5 stars ever had that 13 in our 60 year history, four of which are banks. The other, nine are credit union mergers. All of those were Georgia based institutions. For some reason, I don’t know, we’re headquartered in Dothan, Alabama. We have been here for twenty-five years. But every single acquisition we’ve had has been a South Georgia merger financial services company, so either a bank or credit union. So, the 2 that we purchased recently came about because of the relationships we had with these investment bankers and, we were introduced like we had been in the other 30 plus deals that we’ve looked at and went through our due diligence process and, both of these, even though they didn’t start, the due diligence didn’t start at the same time. Both of them consummated with a purchase and assumption agreement, within five days of each other, which was crazy. So, we ended up doing two at a time, wasn’t our plan, wasn’t an idea that we had, to go through, but, it’s just kind of how things worked out logistically. We managed to pull two off at one time. So, we were, you know, 800 million or so before the two acquisitions afterwards, both banks were between 180 and 200 million assets. And so we’re now just shy of 1. 2 billion, after those acquisitions.

[06:31:51] English

Awesome. Great summary. So, we’ll get into the things that you’ve discovered, now that you’ve done, I don’t know that I have ever talked to anyone that’s done two at one time. I’ll be interested to see what you say to the Bob before he did that, to see if he would recommend that or not. But first over to you, David.

[06:50:46] Southall

Well, ours is a little different. This was our first actual bank acquisition. We had a merger previously with another smaller credit union. That went, that was fairly easy. And I tell everyone, it’s much easier to merge with a credit union than to buy a bank. And without the experience of purchasing and acquiring a bank, we really had no knowledge of how it works, what to expect, and we worked on it for about a year. Actually, we weren’t, um, it was a local bank here who was working on an acquisition from another financial institution, and we saw it happening and it never finished. So, we had, sort of a relationship with some of the executives at the bank. And we came in and said, “Hey, come talk to us if this other acquisition doesn’t work, we’d be happy to talk to you about it. I think we’d be a good fit.” The owner of the bank did not want a large financial institution or a national bank to come in because he really was most concerned about the employees of the bank. And Our cultures lined up very well, very, very similar in the way we treat our employees and the things we do and the way we, provide service to our members, they were very similar. So, it made sense for them to look at us as a partner to merge with. So that’s how that relationship started. There were about 300, almost 300 million in assets, and we were just shy of 400, so we’re around 700 million now, and things are different when you cross the 500 million dollar, mark, and Bob, you know that well, because you’ve exceeded that, but the, merger, , with the bank, was not complicated, but, we were hit with some challenges that we didn’t expect. We didn’t know what to expect, actually. Like I said, this was our first one. We had trouble with regulators a little bit. It was a national bank. So, they had, FDIC and OCC were state chartered. So, we have NCUA and OFR. So we had four regulators in the mix. That made it a little complicated and a lot of delays. But overall, we made it through it and the acquisition happened, almost two months ago. So, we’re working on merging systems, onboarding all the employees. Everyone stayed. That’s what was the most important thing to the owner. Everyone is doing similar or the same jobs. It was really a good match for us and it’s setting us up for, pretty quick growth here in the Southeast. And overall it was a very good, thing for innovations.

[09:29:79] English

Very interesting. So Bob, you said no, 30 times I think right, in between transactions you had 30 different banks that you looked at maybe credit unions as well, but you said no to. What changed in the equation? These last two acquisitions. What did, what was different?

[09:49:73] Steensma

You know, I think, for us, the first two acquisitions we did in 14 and 15, were extremely inexpensive, we paid less than book value for both banks and, we were the fifth crediting to ever buy a bank and the sixth crediting was because they were so close together. Uh, and then the word got out that a credit union could buy a bank. And so, competition for buying banks started to whip up and, I think that just kind of drove the price up a little bit. Being the cheap people that we are, we’re spending our members money here, it isn’t our money. We just had a hard time, I think, grappling with the cost of, of some of the transactions transpired, during those nine years, the math just didn’t work out for us. Moving forward, to these two acquisitions, I think we got a little more comfortable with the price. We grew in size. We more than doubled since the previous two acquisitions in those nine years, in fact, we almost tripled in that nine years in asset size, all organic growth. There was no, no other acquisition, activity that went on for us. I think with a stronger balance sheet and, better income, I think we just could stomach those prices a little bit better and. And for us, it comes back to lots of due diligence. We spend a lot of time upfront doing due diligence on what it is we’re purchasing. And, uh, and I think one of the things that David just mentioned, um, that people kind of overlook with these transactions is culture, you know. Do, do you have a similar culture with the organization that you’re going to purchase? So we, as much as we can on the front end. We try to learn about culture. Obviously, we can get, you know, all kinds of loan due diligence and systems due diligence. We can find out a lot about the bank, but really what we want to learn about is culture. And so some of these banks are pretty closed off. They don’t want to talk a lot about that sort of stuff and so, we’ve got to walk on pins and needles a little bit, but culture’s a huge issue with these transactions. These two just fit from a culture standpoint. It’s crazy because the two that we just did, they’re completely opposite banks. One’s more of an urban, commercial business lender, larger market, kind of thing. And then the other bank was very rural. very small town, a little bit more consumer oriented. They certainly did business loans, but they were also an agriculture based, bank as well. The dichotomy two totally different, situations, but both fit, what we were looking for.

[12:37:06] English

So, just unpacking culture a little bit further. David, you’ve been two months down the path since you actually completed the acquisition. Have you seen any cultural differences that you didn’t notice before? What has shown up?

[12:55:37] Southall

We did. We’ve seen a lot of things we didn’t expect to see from the culture side. The bank that we purchased was primarily, all they did is commercial lending. So, there’s no consumer lending the folks here have no idea about consumer lending. They did only large commercial loans. So, we have a very strong business lending group. We align well that way. One of the things that were very different in is our depositors. They have a very select group of, very savvy. Doctors, lawyers, high balance customers, high deposit customers, large loans. We’re serving the community, we’re a community charter, so we’re serving everyone. So their customer base is very different than our member base. And their customers are handheld pretty much for through every transaction. And that’s a little bit different. So we’re blending that high deposit, very sophisticated, depositor borrower with our general community membership. So that’s been a little bit of a challenge, but there’s so much opportunity there with their customers. They haven’t been able to offer any kind of consumer lending. So now we can do their car loans, we can do their credit cards, we can do their mortgage loans, all of those things. Things that credit unions do very well and then continue to provide the business solutions for them for the large commercial loans that they’re doing. The staff of the bank, they’re learning pretty quickly how different we are as a credit union, even though we thought and it looked like our cultures really aligned, well they did, but there are so many differences between how a bank operates in a credit union, as we all know. So that’s been a learning experience for all of us. And the bank employees are really enjoying learning about the credit union and how different we are and being able to do different things other than just commercial loans. So that was a nice thing for both us and them to merge together to offer these things.

[15:00:81] English

Yeah How are you, handling the customer service for the commercial depositors? Are they still going to the bank folks? Are they starting to come to your folks already?

[15:09:27] Southall

Here’s what’s happened is the CEO of the bank, stayed on and their role now is to pretty much work with every one of the high depositors and the sophisticated borrowers, help them through the transition, introduce them to innovations. It’s going well, actually, you know, we were a little concerned. We don’t want depositors to leave just because now we’re innovations, not the bank. The CEO and the executive team from the bank are doing a really good job and making sure that they’re comfortable. The biggest question is, are y’all okay as the employees? And that’s the thing that most people, most customers are worried about, you know, because when you hear about a bank being purchased, usually everyone starts disappearing, but everyone stayed. And so that’s made everyone feel very comfortable. So far, it’s been very positive. The customers of the bank or some of them actually already knew about us, maybe had accounts with us, but you know, we’re a small community. So, we all know everybody, the financial institutions are all familiar. So that transition has been pretty easy. But the executives from the bank, that’s their role is to make sure that these customers are comfortable with this transition and we want them to stay and they’ve already started doing more loans and our lending teams are working together, the commercial lending teams so it’s business as usual, which is a good thing.

[16:27:93] English

Yeah, yeah. How about you, Bob? Have you found any cultural differences that you didn’t identify in advance?

[16:35:02] Steensma

No, we’ve already completed both system conversions as well. So, we are completely done from a project standpoint with both of these acquisitions. And it was interesting. One of the banks handled it better than the other bank just because of their culture, so that was interesting to go through. It was, it was a learning opportunity and, learning situation for our staff as well. We had to spend twice as much time with one of the banks after the system conversion, helping, giving them, the training and the ongoing training that they needed once they were live on our system. They had been on one system for 30 years and, a bunch of long term employees. So, everyone’s just kind of doing what they did. And so it was a lot of change. And so you just have to understand I mean, we had to revise our plans. We had people on site originally scheduled for a couple of weeks after the systems conversions to be helping those employees and holding hands and those sort of things. And we ended up staying a month. Twice as long as we thought we would with 1 of them and it was interesting. There were certain things that we learned on the 1st conversion again, even though we’ve done this several times, everyone’s different. Things that we learned, say, with debit card migration and things like that, that we changed the process on the 2^nd one, it went much smoother. So that was the benefit of doing, 2 of them together and in fairly close. Proximity of each other that helped us. So I go back to when I was 16, my first car had a Mustang and I had to replace the alternator and it took me three hours to do it the first time. And then I realized I did something wrong. I had to take it off and do the whole thing again. It took me 45 minutes a second time. So, you do something once and you can learn from it. And the next time you do something, it’s easier, especially if it’s in a close proximity timeframe. So I liken that experience as what we had with the two conversions that we just completed.

[18:36:78] English

The debit card, situation is one that you and I know talked about a little bit in advance. Can you go, if you’re comfortable, a little further into that one, like I know there was a specific barrier to the connection there. Can you talk about that?

[18:49:49] Steensma

Yeah. So, the first conversion, with our card processor, the only way you can authenticate as a new card holder. So keep in mind, we’re bringing all these new members into Five Star from the bank, their bank debit card is no longer valid. We’ve mailed all the cards to everybody, and this includes credit cards as well, same processor. So, all the new cards are out in everyone’s hands, but you have to authenticate it, via phone and you have to put your home phone number so that was the only authentication method we had for that first conversion. So, had a lot of problems with that because, just think about systems and whatnot. The data was just not up to date in the bank system with phone numbers for the customers that they had that were now members of Five Star. , their data could have been 15 years old. Everyone now is basically moved to a cell phone, people had trouble authenticating and getting the debit card turned on so they could use it.

So, the 2nd conversion, we said, okay, what can we do to alleviate this pain point? And so, we opened up 3 or 4 different authentication methods from the data from the bank system to be able to allow people to authenticate and turn the card on. So that was a tremendous game changer for us on the second one because it helped with being able to get everything turned on fairly quickly. And we did a lot more front-end verification of the information, before the conversion as well with members or potential customers at the time, before we switched. That for us was a big deal on the second one that helped make things go smoother.

[20:22:70] Southall

Bob, I’m taking notes, so.

[20:26:54] Steensma

Yeah, you know, and that’s the best thing. We’ve made so many mistakes and had so many challenges. You learn from them. Well, that’s like I said, it was good for us to go through one trip and fall a little bit and then pick ourselves up. Fix it on the second

[20:41:90] Southall

We’re on the three hour alternator switch right now. The next time it’ll be 45.

[20:48:61] Steensma

That’s right, that’s right.

…

[20:58:49] English

So have you seen anything like that already, David?

[21:00:94] Southall

Similar things. We’ve got a full team of people from the bank and from Innovations on the conversion team that’s happening in February. So, we have a little bit of time and we’re a Symitar credit union and they have different suites you can buy to help you through the conversion, and we paid for the biggest one because it has to be done right. We can’t mess this up. With the sophisticated customers from the bank, if we misstep on that, that wouldn’t be good for us. So, we are focusing everyone on this conversion and making sure it’s right. So, there’s test Sims, the data’s being transferred now. So, we’re going to do several mock conversions prior to the actual live conversion just to make sure things are right. And, we have a great team on this conversion team, a great group of folks that they know what they’re doing.

So, we want to make sure that’s right because the last thing we want to do is have conversion day come and things aren’t happening the way they are supposed to. It’s gonna be a little confusing for the banks. A lot of the bank accounts are set up much different than the credit union accounts. So it’s going to be a learning experience. We’re working on how do we get the message out? You know, how do you communicate the conversion? What’s going to happen on this day? There’s all those components, there’s a million things happening at once. And we haven’t done this before. I love hearing what Bob has to say, you know, these are very important things that, you may or may not think about and I’m sure there’s going to be a few missteps, but that’s just the way it goes. But we’re going to do our best to get the two systems merged together and we have some time on our hands, which is good.

[22:40:90] Steensma

Yeah, we use two different, uh, the first two bank acquisitions we did, we did everything in house. With regards to system conversions, those were small banks that it worked out fine, these banks being much larger, we ended up using help to do the conversions and the mergers of the two systems. We ended up using two different companies to do it, which was fine. I explained to the board before we, did the first system conversion, you know, one of the issues we have in credit union land, is member apathy. They just, people don’t want to move financial institutions. It’s, it’s really tough. It’s a very difficult transition. We all have automatic drafts and things come out of our accounts.

And, we don’t even know everything we have in most cases. And that’s the fear. Most people don’t want to move because of all of that stuff tied into what they have. And I explained to the board, we’re going to do that for 8, 000 people twice, you know, 4,000 with this team and 4,000 with that team. With this bank and that bank so we’re going to do it twice. We’re going to move their credit card, their debit card, their checking account, so, yeah, it is a complicated process. And it’s good that you’ve got time between your, purchase date, legal day 1 and system conversion day. Communication with members obviously, is a big deal. We’ve sent several more member communications on the 2nd conversion than we did on the 1st one. We do think it helped, but there are people that come in with an envelope that’s never been opened. And they say, I got this is do I need to open this? Yeah, it’s fun. That’s just what happens. It’s human nature.

[24:20:46] English

Several things that you said really struck me. The bank that Bob, you and your team, bought that had been on the same system for 30 years. You said it took twice as much time. From your team to kind of help them adapt to the new software. If you were going back to talk to the Bob last year, would that be one of the things you’d look to identify if the bank has not had very many changes? You need to substantially increase the length of time that you build in and would you time it the same way because I think you did the systems conversion and then put the time in or would you change the order that that occurs?

[25:09:16] Steensma

Well, you’re locked in with the vendor based on the system conversion day so those were, believe it or not, those system conversion dates were already agreed to and under contract before we even purchased the banks. Now, we were in due diligence, well we were waiting for, you know, regulator approval during that time, but, you know, they’re so far out with their dates that you’ve got to, you know, basically, once you’ve decided to buy the bank and you signed a purchase and assumption agreement. You have to get it on the calendar now because it’s sometimes 18 months, even before they can schedule it from a team standpoint.

So, but to answer the question, yes, what we failed to do on the 1^st system conversion with that bank was recognized that it’s going to take them a little bit longer to learn the system. I think we could have done a little bit more upfront, I think we gave 30 days for the upfront training where we were on site. Classroom and practical training with the staff. It’s just different when you flip a switch and you put a customer or a member in front of a teller or a member service rep, whatever you call them. It’s just different. There’s a different dynamic to it. Then let’s practice this transaction. I’ll have you do this and, I’ll play the member. It’s just different when it’s a live situation. Yeah, we probably should have gone and spent another three to four weeks more of that upfront training, to make sure that everyone was just that much more comfortable, but not thinking about it, we just, didn’t see that upfront. It’s clear, everything’s clear in the rear-view mirror.

[25:52:62] English

Yeah. That’s why we’re doing this podcast.

[26:55:30] Steensma

Hindsight’s 20:20 Yeah. Yeah. And again, different banks. The second bank was less consumer transactions, more of a business bank, so the lobbies just don’t see the traffic that the other bank does see. That dynamic plays part of it as well, because they just don’t see the activity, so to speak, everything’s a little bit more digital, remote, you know, uh, those sorts of things. Um, Yeah, it’s everyone’s different. Everyone’s a learning lesson. Maybe we’ll write a book about it at some point.

[27:28:16] Southall

Bob, you were talking about the blending the, the lobby traffic and the people and learning the systems. You know, that was one of the things that we had to really focus on. Think how are we going to do this? Because now we have two bank branches here and in our community that are now Innovations. So, when our members drive by and see Innovations signs. Oh, here’s a new branch. So, they go in, do we have an Innovations branch inside this building? Yes, we do. Which was good because the bank employees can now learn our system way before the conversion date. So they’re already, I call them bilingual because they’re doing two systems, their old legacy and then our innovations system. And so that really, that really has been a really key thing.

I wanted to make a point for those that haven’t done this before. One thing you said about, the contract with your core provider, you have to extend it out however long you need it to get the conversion date lined up. All contracts are important. This bank, they were prepared for this acquisition. When they renegotiated contracts, they made sure that they all were expiring at the time of the acquisition, they really did their homework and it, that made a huge difference because, you know, you don’t think about some of these things, you know, your, especially your core processor contract, what if it’s a five year contract and you acquire it in year one, you got to buy out four years or, you know, just fill in the blank with whatever contractual agreements you have. So, when you mentioned that, that reminded me that was a key point that I think everybody needs to understand is, the contracts. Because that could get very expensive if you have a very lengthy contract that you have to buy out because of acquisition.

[29:15:00] Steensma

So, those two big ones are core and their debit and credit processor, you know, so the big ones, uh, and of course they got others, but yeah, that’s the…

[29:24:06] Southall

The big ones are the ones that count for sure.

[29:26:60] Steensma

Yep. Yep. Millions of dollars is really what it amounts to. Yeah.

[29:30:10] English

Now, Bob, you said that you got some outside help. In doing these last two conversions, right? Can you tell me a little bit about the context of what drew you to doing that? And then, how does that help? How is that impacted these acquisitions versus when you did it?

[29:52:65] Steensma

Well, the first two, like I mentioned earlier were small banks, the first bank we bought was one location and, uh, five employees and 20 million in assets. And I think there were, 1600, customers at the bank that became five star members, once we, uh, purchased the bank. For that transaction, we manually built the accounts in a test system. And then we manually put some security numbers in, we built loans, and you know, savings and checking accounts and all those kind of things. And then on system conversion day, we just move the money and the accounts were already set up in there and so it was a simpler process. So, each of these 2 banks that 4, 000, customers or somewhere between 3 and 4, 000. So, we said, okay, we don’t want to manually build 8, 000 accounts, uh, too much risk for data entry issues. So, we said we need to use a program or have a programming help to be able to, to make this happen. So, um, so that’s what was the decision maker for us was simply just the size and the impact. And you think of the lives that you’re impacting if you do have mistakes and you know, that’s what really drove us to, you know, to, you know, pay for some professional help to make sure it was electronically done. You know, we still obviously, like David mentioned, we have a big team internally that that works on these because there’s so many facets of these types of projects, but, from the systems conversion standpoint, core to core is where we got the additional help this time.

[31:39:61] English

Very good. So let’s just try to wrap it up and what I’m looking for is if there are other things that you could go back and tell the David and Bob before these latest acquisitions to watch out for. We’ve already identified to check into the culture and to make sure that there’s a fit in the culture, to look for the systems conversions that they have had, the changes that they’ve experienced as a team, to make sure that if they have been on the same thing for a long period of time, that you add to your process and support time to allow for that. And then, the debit card transaction that, that Bob mentioned to make sure that you have many ways to authenticate the members when you’re bringing things over. Other ideas, other final, thoughts for our listeners on if they’re looking into an acquisition or if, again, you could talk to yourself before you did these, what else would you say?

[32:43:46] Southall

Well, I think the big picture is, does it make financial sense to even begin the process of acquiring a bank? You know, how healthy is the bank? Can you afford to buy the bank? It’s not a merger. You don’t just come together. You’re buying out the owners of the bank. So does it make financial sense and you know for us this bank was flush with cash. We’ve been a hundred percent loaned out far back as I can remember, and this bank was probably 40 percent loaned out. So it made sense for us. Yeah, look at all the cash we’re getting now, we can start loaning again and be very aggressive with our lending culture, so it made financial sense. I think that’s the biggest thing you need to look at. And then the second thing for me is, do you have the people that can make this work and be successful? Because the last thing you want to do is flub it up and you know, you get all these customers of the bank mad and then it just turns into a big mess. So, you know, we got to make sure that it makes financial sense and that we have the team that can make it happen and get us through this. So those were the two biggies for me.

[33:42:90] Steensma

Yeah, I’ll echo that. David is wise and beyond years. Uh, those are two, uh, two very good things. You know, one thing we came up with these two transactions, that was different from the first two that we did were, employee retention. We didn’t have any major issues with that, but that’s something you certainly want to focus on early on is, making sure that employees know that they’re going to have a job. Be transparent with who will and who won’t, the vultures in the banking world, as soon as a deal is announced, come and they’re praying on the employees of the bank saying, you don’t want to go to a credit union, your life’s going to be different, come over to us and stay in banking and stay doing what you know that you’ve done for years. We really had to fight the other banks off with these transactions, because we did have several employees that were known quantities in those markets. The banking world’s small too, just like the credit world is. So the vultures came out. So I think employer retention is another focus, like you can, uh, tuck that in with culture. One of the things that was a little bit different for us on these transactions. And like David said, the staff internally at the credit union, making sure you’ve got a good team to be able to pull off these acquisitions.

This is extra work for everybody internally at the credit union. So we all have day jobs. We all have our expected things that we’ve got to get done. During the day and everyone that are on these conversion teams and these acquisition teams, this is on top of what we do on a daily basis. So, we still got to close the books and in accounting and we still got to pump money and lending. These are all extra projects, extra work for people. So you’ve got to be sensitive to that and yeah, we did two at one time. So, it was one of those things that, you know, can we handle this? Along with the other things that we’re doing, we didn’t stop the other projects that we had going on. Like, we all have a laundry list of those that are happening. One good thing is I had 75 percent of the team that did our last, bank acquisition nine years ago was still here. Um, the only part that was different for us was, uh, information technology was a complete turnover from that nine years ago. But I had a good team already in place there as well. Yeah, we were able to pull off, uh, two at one time, but we’re pumping the brakes for 2025. Going to get back to what we’re doing. Uh, not going to say we’re not going to do any more than we certainly are, are in the market and I’ve told everybody no bank acquisitions at least, uh, for the foreseeable future, doesn’t mean we’re going to not keep talking to people, but nothing in 2025.

[36:37:36] English

So, would you, would you do 2 at 1 time? Or would you, uh, would you suggest that David hurry up and go find another 1 so he can try to do 2 at 1 time?

[36:48:17] Southall

We’re always looking. You just never know. Sometimes these deals fall in your lab without you out, you know, searching for them. That’s how this one worked for us. But you know, our strategic plan is to always be looking for opportunities, whether it’s mergers, acquisitions, or, fill in the blank. So yeah, we’re ready. Let’s keep going. My team would need to say, I’m ready.

[37:07:72] Steensma

Yeah, for us, acquisitions are a passive strategy. Uh, our active strategy is organic, you know, so, uh, we’re opportunistic. So if an opportunity is there, we’ll certainly take a look at it. We’ve even looked at a few in the last 30 days, that we passed on. We’ll look as deals come up. Uh, but it’s a passive strategy for us. Actively, what we’re trying to do is organic growth with our existing members and new members.

[37:39:50] English

So would you, if you had multiple deals. Would you put them together and try to do it at the same period of time? Is that, is there a benefit that you’ve seen from doing them at once? Or would you say, no, uh, separate them out if you can?

[37:54:25] Steensma

Yeah, I mean, I would say from a regulatory standpoint, it was pretty seamless that we did two at one time. So for us it was just like one, the NCOA did go into both banks, so it was more on them than it was on us. I wouldn’t shy away from two at one time. Ideally, I’d rather do just one at a time, but, if it’s there and the timing works out, we were talking to the first bank for eight months before the second bank even came into contact with us, even into our radar. The second bank was just very, very quick. They knew what they wanted, wanted to get it done. So they finished, you know, uh, at the same time, the first bank did from at least a decision making standpoint. And so that’s how they ended up literally going at the same time.

[38:39:53] Southall

People are also, they’re all watching what’s happening. You know, if you do a good job and it, it runs smoothly and things happen as they should, then, you know, it gives the. If someone’s looking, hey, they did a good job, you know, that might be a partner that we want to consider talking to, if that’s part of their plan.

[38:58:00] English

Outstanding. Thank you so much, Bob and David, for taking the time today for the service to your team, to your members. I think this is a great illustration of the credit union spirit, having you guys taking the time to capture this information so that other leaders of the credit union movement can benefit from it.