Branches in Lawrence, Hokitika and Westport will close; where each serviced less than 700 NZCU South customers, while two branches will be consolidated into one in both Christchurch and Invercargill.
NZCU chief executive Andrew Leys said the "unenviable decision" to restructure and close branches and make 17 people redundant was because of a decline in loan activity, coupled with lower membership growth.
"Reduced in-branch transaction activity has also made the task of keeping doors open in smaller branches and communities an extremely difficult one," Mr Leys said.
Membership stood at around 24,000 year on year, but the number of loans had declined by 10%, and also in general were smaller, with the total book value down about 13%.
"To some extent, we are the victims of our own success; encouraging members to have sound financial management and not be racking up inappropriate debt," he said.
While credit card borrowing was up nationally, Mr Leys said hire purchase and personal loans across the country were down almost 30%, reflecting the sector trend NZCU South was having to operate in.
When asked, he disagreed that because the big four Australian parent banks owning New Zealand's largest banks had all fared relatively well during the financial crisis, depositors were now turning to them for assurance.
"Our depositors supported us throughout the global financial crisis. We fared well," he said.
He said the credit union had "a comprehensive redundancy scheme", and additionally to those entitlements the 17 affected staff would be supported "in every way possible in finding and preparing for new roles".
Of the 17, some had been there "months", several for more than a decade and one person had more than 20 years' service, he said.
Transfers were unlikely because of the distance between branches and the lack of any new positions, he said.
He emphasised the restructuring decision had nothing to do with what staff had done in the past, nor could do in the future, and followed an "exhaustive review" of all possible branch options by the board and senior management.
"Our priority at this time is looking after our staff and our members."
He declined to say how much the redundancies were costing, or the overall cost of the restructuring, because of commercial sensitivity, but said it was "a large number".
"The changes we are making will ensure we have a strong and sustainable platform to service the needs of members into the future in locations that will remain open," Mr Leys said.
On September 7, the Lawrence, and Westport services will close outright. No date has been given for Hokitika. In Invercargill and Christchurch, two branches will be amalgamated into one, the latter in Hornby.
Late on Tuesday, management met staff in the affected branches, with the exception of Hokitika because of flight cancellations.
There are 14 branches at present, and three agencies. All the affected branches were leased and near full-term, except Christchurch, which may be sub-leased for the following year. The goal was now to consolidate the organisation to be cost effective and responsive and promote growth with new products, services and new technology, such as the planned September-launch of a debit card, Mr Leys said.
• When reporting its full-year result, for the year ended June 2011, in September last year, NZCU South booked an operating surplus of $851,000, compared with $741,000 reported in the 15 months ended June 2010; having changed its reporting balance date.
Total income for the reporting period was $18.5 million, reduced to $15 million, after deducting interest expenses and adding other income. Total expenses for the period were $14.15 million.
Mr Leys noted at the time that continuing difficult trading conditions had continued throughout the reporting period, including a decline in loan demand during the second half of the financial year, which prompted an overall decline in total loans for the full-year result.
• NZCU South's next full-year report is scheduled for release in mid-September.
• NZCU South is an entirely separate entity to similarly branded credit unions in the North Island such as NZCU Auckland, NZCU Baywide, which are not affected.
