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Two Fairfax County-based credit unions have recently announced plans to merge, showcasing a national trend of larger credit unions absorbing smaller ones in an effort to keep the credit union concept alive and competitive with banks.

Apple Federal Credit Union and Vantria Federal Credit Union recently were approved by the National Credit Union Administration to merge in early May. Apple is headquartered in Fairfax with a branch network extending throughout northern Virginia. Vantria is also headquartered in Fairfax County with one branch in Springfield.

Vantria was established in 1950 and has $73 million in assets, and more than 7,700 members.

Apple says it will absorb Vantria, including all of its employees and its branch, so there are no expected layoffs or branch closings related to the merger. Vantria members will automatically assume Apple membership and immediate access to their full line of products and services.

“Apple will benefit from a larger member base and a slightly broader branch network, resulting in greater convenience for members of both credit unions,” said Larry Kelly, president and chief executive officer of Apple. “In addition, Vantria shares many of our core values including a strong membership focus and sense of community.” According to Kelly, customers’ banking needs have gotten very sophisticated over the last decade or so and that fact, coupled with an unstable economy, increasing regulation, and other resource-consuming requirements have forced many smaller credit unions to merge or die.

“Vantria has been adversely affected by the decline in the real estate market, loan defaults and bankruptcies, as well as the increased burden of an evolving regulatory environment,” said Patricia Malatesta, chief executive officer of Vantria. “Our Board of Directors and management conducted an extensive search to find a prospering credit union with excellent growth potential and selected Apple FCU as the best possible partner.”

Kelly said Apple was established in 1956 by members of Fairfax County Public Schools and has grown to today having $1.7 billion in assets, 21 branches and more than 148,000 members. Apple serves Fairfax, Frederick, Loudoun, Prince William and Stafford counties, and its mission is still primarily to serve the educational community.

According to Kelly, credit union mergers accomplish two goals: it enables smaller struggling credit unions better stability in an uncertain economy, and it delivers a built-in customer base to the larger credit union that is already familiar with the credit union concept.

“The fundamental difference between a credit union and a bank is that a credit union is a nonprofit cooperative with no stock holders. Every member has one vote in the election of board members — who consequently are unpaid volunteers. Another fundamental difference is that as opposed to a bank like Bank of America in which you can own stock without being a customer, in a credit union you cannot have an ownership interest without being a customer.”

In addition, Kelly said that the nonprofit element of credit unions require them to deliver the best value to their customers and not its principals.

“But there is almost a certain minimum amount of scale needed to exist as a credit union today,” he said. “Customers want credit cards, debit cards, ATM locations and to be able to access their accounts online and though their smart phones. Being able to supply all those needs requires resources.”

In addition, Kelly says increasingly resource-consuming federal requirements are causing many smaller credit unions to struggle. “Credit unions are relatively small in the grand scheme of things,” he said. “There are about 7,000 in the U.S., and if you put them all together, their assets still don’t add up to a major bank like Bank America.”

But Kelly said credit unions are required to adhere to many of the banking industry’s federal requirements.

“Regulation and federal laws and the resources required to comply with them can be intimidating and overwhelming,” he said. “The Bank Secrecy Act provisions put in after 9/11 for example, require that all financial institutions monitor customers’ financial activity to make sure there is no suspicious activity. That alone requires overwhelming resources. In addition, it takes tremendous resources to ensure that customers’ accounts are safe from hackers and other threats.”

Kelly said that the merger with Vantria, as well as its 2011 merger with Prince William County-based Synergy One Credit Union, has strengthened Apple and kept it competitive.

“We are in good shape and able to provide for our members, but I wouldn’t want to try starting a credit union today,” he said. “That would be very intimidating.”

gmacdonald@fairfaxtimes.com