A bank president recently complained to Banker & Tradesman that he owns stock in a particularly acquisitive area institution and “all I get is dilution” when that bank makes a buy.

But two credit unions may have found a solution to the dilution problem endemic in financial institution mergers and acquisitions.

When the Polish National Credit Union, based in Chicopee, and Valley Stone Credit Union of Wilbraham merge, Polish National members won’t get dilution. And Valley Stone members will get cash.

Valley Stone has a capital ratio of slightly more than 20 percent. Polish National’s capital ratio is about 14.5 percent.

“We did not want to dilute our capital,” Polish National President and CEO Jim Kelly told Banker & Tradesman. As a result, Valley Stone depositors will get the difference, about $5.5 million, as a special dividend.

Based on typical deposit sizes at Valley Stone, members there shouldn’t be surprised to receive $10,000 or more, Kelly said. Some depositors keep more than $700,000 at Valley Stone and will get checks for more than $80,000.

“This is the members’ money,” Kelly, a former state Division of Banks and Office of the Comptroller of the Currency examiner, said. “It was earned over a very long period of time. This is a way to reward them for their loyalty.”

Stan Ragalevsky, a banking attorney with K&L Gates in Boston, is representing Polish National in the merger. Ragalevsky told Banker & Tradesman special dividends have “become less frequent over the years” as mutual institutions’ cash reserves have dwindled.

“What’s startling about this is the dividend is $5.5 million. That’s 10 percent of deposits. That’s what’s special about it; that and the fact that Polish National is the one who suggested it. It creates a lot of good will with the members of the disappearing credit union,” Ragalevsky said.

“It really is a nice contrast to some of the things we read about greed and how institutions are becoming impersonal.”

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Valley Stone has 4,797 members. Polish National has about 17,000. When it closes June 30, the merger will create a Polish National Credit Union with more than $470 million in assets and nine branches in Massachusetts and north central Connecticut.

It will be led by Kelly. Valley Stone President and CEO James Nagy will become a senior vice president at Polish National.

Like other small institutions, Valley Stone was faced with a choice to either find a merger partner or go it alone in an increasingly risky and expensive banking scene.

“Margin pressure is huge, and the bigger your investment portfolio, the bigger your headaches,” Kelly said. “If you can’t put the loans on the books, there can be an issue. A low interest rate environment doesn’t bode well if you’re a small credit union with a large investment portfolio.”

Valley Stone was established in 1937 as the Monsanto Employees Credit Union. Earnings have been negative for a couple of years, but that 20 percent capital ratio is quite healthy.

“With 20 percent capital, you can ride that (negative earnings) out, but if you wait too long, you’ll burn through that (capital),” Kelly said.

The merger has been in the works for about a year and is the result of numerous meetings between management teams and members. The deal wasn’t struck by just a couple of directors or the CEO. The two credit unions have contiguous territories, “and I genuinely like the people,” Kelly said. And with the additional resources Polish National can provide – like a full-time compliance officer – “their jobs are going to be easier.”

Members of each institution overwhelmingly approved the merger.