CUNA Lending Council White Paper Discusses Lending Due Diligence in a Merger

Madison, WI – Lending due diligence helps credit unions involved in a merger determine whether their efforts are likely to pay off, according to a new CUNA Lending Council White Paper.

“Lending Due Diligence in a Merger,” written by author Darla Dernovsek, is based on information gathered from credit union experts who have participated in multiple mergers.

The white paper explores the steps involved in performing lending due diligence. Lending leaders must “peel back the onion” of lending operations layer by layer to determine whether proposed merger partners are a good “fit,” examine data, segment the portfolio and determine the allowance for loan and lease losses (ALLL).

Understanding the differences in the merger partners’ respective approaches to lending is critical in performing effective due diligence. “There will always be differences in the loan portfolio; what you need to understand is how big are the differences and where do they exist,” said Steve Miller, Director of Operations/Senior Analyst for Twenty-Twenty Analytics.

Credit union experts shared information about how to handle the “red flags” that mark problem areas. The due diligence process should identify these potential problems, measure the risk and then allow for proper reserves to allocate against possible losses. Examining the collections process is also essential.

In some cases, the post-merger gains that will be achieved through scalability can help offset potential losses, allowing the merger to go forward despite higher-than-expected demands on reserves. In other cases, due diligence can reveal problems that may change the nature of the merger or even lead to its cancellation.

By performing due diligence that digs deep into the loan portfolio, credit unions can help ensure that potential mergers measure up to their potential.

CUNA Council members are eligible to receive complimentary copies of this, and over 300 other white papers; non-Council members may purchase white papers for $50 per copy.

The paper is available online in the white paper section of

CUNA Lending Council
The CUNA Lending Council is a member-led partnership of lending professionals dedicated to providing education, leadership, networking support, professional development tools, and expertise to its members in order to shape the enhancement of the role and diversity of operations in the credit union industry. The CUNA Lending Council is one of the six organizations that make up the CUNA Councils, a network of more than 5,500 credit union professionals. For more information, visit or

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