SOUTHFIELD, Mich. – William Walby, CEO of the $3.3 billion CenCorp, is in his second tour so to speak with the corporate and things are going just great. Walby worked for CenCorp for over eight years starting in 1990. He then left in 1999 for a year and a half to work for an equipment leasing company as a CPA. He came back to the corporate as its CEO in 2000. Walby, 42, said CenCorp is in a unique environment and has adjusted accordingly. "In the state of Michigan state charters make up two-thirds of the credit unions. Those state charters have more investment authority than a corporate credit union," said Walby. As a result, he said they have more options when searching for yield, such as corporate bonds. Walby said the corporate offers competitive term investments, but it gets much of its income from fee income. "We're a little bit different than most corporates. This year we are generating more in fee income than we do in net interest income," said Walby. Walby said fee income is a much more stable source of income, so the corporate is perfectly content with the situation. Much of the fee income comes from its check processing operation. CenCorp is the largest CU item processor in Michigan. It processed 158 million items last year, up from 150 million in 2002. Walby said even though the number of checks written is declining, CenCorp was able to boost usage by adding new clients. Other fee income comes from its ALM service (started in 2001), and through offering SimpliCD (started in 2002), but neither brings in anywhere near the fee income of item processing. Item processing and check related services account for 85% of fee income. People often forget about the other side of item processing, which is processing deposited checks from members. Walby said CenCorp processed 54 million of those last year. Michigan is home to approximately 440 credit unions, of which almost all (436) are CenCorp members. There are $27 billion in CU assets in Michigan. The state doesn't have many large CUs, but it does have approximately 66 over $100 million in assets. Walby said for now CenCorp is content with focusing on its Michigan members, rather than marketing out of state which corporates throughout the network have been doing. "We do have four out of state members, but at this point it hasn't been something we've focused on. We're much more concerned about the existing membership and the folks that have supported us," said Walby. He's not an isolationist by any means. "We are very interested in cooperating with other corporates, whether that is through a joint venture or a merger. We're interested, no question. It's whatever is in the best interest of the existing membership at CenCorp," he said. Walby isn't anti-competition either, he just thinks the aggressive tactics in some pockets of the country are getting out of hand. "We have a system that is built on cooperation and you're bringing in a competitive element in certain areas of the country. I see it in individual areas, but I sill think the cooperative element is there." CenCorp wants its members to know, said Walby, that they're No. 1. Part of that is seen in its member capital shares. "Even in this low rate environment we paid 3.5% for 2002 and over 5.7% in 2001." As for challenges in the network, Walby said one is clearly in the payment systems area. He said corporates are eventually going to feel the effects of declining check writing, but that might not be for some time. Another possible hit to item processing is the growth in overdraft protection programs which can cause a dip in the number of checks returned. However declines in check usage open up opportunities for corporates with ACH and electronic payment methods. "I think the other item out there is loan demand at credit unions. I'd like to see demand go up. That's not something corporates can specify. You see a lot more deposits at the corporate level now. Even though that gives corporate more revenue, I'd rather see credit unions investing more in loans as opposed to overnight funds." Walby is a Michigan guy through and through. He was born in the state (grew up in Royal Oak); is a graduate of the University of Detroit; and has worked exclusively in the state. A CPA by trade, Walby worked at KPMG for four years, and spent three years as a CFO at a commercial bank before joining CenCorp. Personally, Walby and his wife have been very busy with their new adopted son. "He's pretty much taken over my spare time," said Walby, who said that's a good thing. [email protected]