BY MATTHEW STONE

Staff Writer

Anne L. Boulette plans to close her KV Federal Credit Union account if the credit union's proposed merger with Kennebec Savings Bank wins member approval.

"Credit unions are credit unions, and I think the proposal to change to a bank and merge with a bank is not a good thing," said Boulette, of Oakland.

Melanie Gillen, who said she is a KV member, is also opposed to the merger, which officials from the two Augusta financial institutions announced nearly three weeks ago.

"I think it's going to limit choices for the members that built the credit union themselves," she said. "They own it."

As KV Federal Credit Union plans its merger with Kennebec Savings Bank, the credit union faces a public relations challenge in persuading members to vote in favor of the merger.

The credit union plans two meetings this week -- on Tuesday and Wednesday nights -- to answer members' questions and explain the thinking behind the proposed merger.

"What we're going to do is provide accurate information so that our members will know exactly what our board has explored," KV Federal Credit Union President Beverly Beaucage said. "We're excited about this prospect and we understand how difficult change is."

News of the merger between the bank and the credit union -- which is the first of its kind in Maine and among the first of its type nationally -- almost immediately sparked opposition from the Maine Credit Union League, the trade association representing the state's credit unions.

On Sept. 11, credit union league officials met with KV Federal Credit Union officials to try to persuade the credit union to remain a credit union. The league plans to pursue an effort to sway members' January vote against the merger.

The January vote will occur if KV Federal Credit Union directors vote in October to advance the merger decision to the credit union's membership.

"Our interest in this is that as much accurate, comprehensive information is exposed to members ( as possible) so ultimately the members make an informed decision," said John Murphy, the Maine Credit Union League president. "This process has a long way to go."

In the three weeks since officials from the two Augusta institutions announced their intentions to combine, a handful of the credit union's 8,000 members have voiced their opposition to the merger.

Some, like Boulette, have been involved in the credit union movement in the United States. She worked at Waterville-based KSW Federal Credit Union for 35 years and is a member of several credit unions.

"I still have credit union running through my blood," she said. "I think we need to stick together and see that this remains a credit union and does not go to a bank."

Gillen, who now lives in Hanson, Mass., said she worked at KV Federal Credit Union for more than 12 years.

"I'm a strong advocate for the credit-union movement and people helping people and the philosophy the credit union is built on," she said.

KV and Kennebec Savings Bank officials say they have heard of some members' suspicions, like the worry that the merger will cause credit union members -- who own their institution -- to lose the equity that has built up in their credit union over time.

According to Beaucage, KV Federal Credit Union has approximately $600 in equity per member.

"The equity in a credit union is not available to members unless the credit union is liquidated," she said. "This is a very strong, very healthy credit union, and that liquidation is just not going to occur."

"That's not common for a solvent institution," said Alan Theriault, president of the Portland-based CU Financial Services, a firm that has assisted credit unions conversions to banks.

Beaucage and Kennebec Savings Bank President Mark Johnston said the average equity per KV member would triple if the merger ultimately takes place.

"What (merger opponents) don't realize is that when these two organizations are combined, the equity per (KV) member goes up," Johnston said. "They look at the bank as its own entity. We're owned by our members, too."

Kennebec Savings Bank is a state-chartered, mutual savings bank owned by its depositors. As the merger approaches, the bank plans to pursue a federal charter, under which each account holder votes on the bank's governance.

Merger critics have also pointed to differences between the bank's and credit union's interest rates on savings accounts.

In the days following the merger announcement, Credit Union Times, a credit union trade publication, reported that KV Federal Credit Union offers higher rates on its Certificate of Deposit accounts than Kennebec Savings Bank.

"Generally, credit unions are paying a little more than banks," Johnston said. "That's not always the case."

The merged bank will not assume only Kennebec Savings Bank's rates, he said.

"When we combine, we take the best of both," Johnston said.

And as the merger vote nears, Beaucage faces concerns that she stands to gain personally from the merger.

"I question who is going to be benefiting from this truly," said Gillen, the KV member from Hanson, Mass. "That's going to be determined, but it's certainly not the members."

Beaucage, who would be an executive vice president at a merged bank, said her salary would not change after the merger.

"The officers of KV will become employees of Kennebec Savings," Johnston said. "They are coming over with their current salary. We're not adjusting salaries up or down."

Theriault said he has seen similar forces line up each time he was worked with a credit union planning to convert to a bank. One of his firm's specialties is helping credit unions become banks, a conversion that 39 credit unions -- of more than 8,200 nationwide -- have undertaken since 1995.

"We've seen situations where there have been handfuls of people who have been very fond of the credit-union charter or have personally invested a lot into helping a credit union grow or have been involved in the credit-union movement in one way or another," Theriault said. "We've seen them become critics of the process."

It is not a widespread trend for credit unions to convert to banks, he said.

"It's not necessarily something that every credit union would want to do," Theriault said. "But, in general, if a credit union is in an area that's growing and they have management that is able to handle a new charter, then it is appropriate for those credit unions."

Being tax-exempt is no longer advantageous enough for some credit unions who seek to grow their product offerings and assets, Theriault said.

"As a bank or mutual-savings bank, you have many more lending and investment powers," Theriault said. "And you also have the ability to serve an unlimited field of membership, whereas credit unions have limited fields of membership."

Matthew Stone -- 623-3811, Ext. 435

mstone@centralmaine.com