CUSC Member CUs Vote to Go With CO-OP; Move Still Feels More Like Partnership Than Buy Out
ATLANTA -- The stage is set for the Credit Union Service Center Corporation, the shared branch network which has built its business by working closely with credit union leagues, to become an affiliate of CO-OP Financial Services on or around June 1.
CO-OP Financial Services is the parent company of the CO-OP ATM and EFT network. It is also the parent of Service Center Corporation shared branch network.
The member credit unions of CUSC voted to approve the network's pending merger with CO-OP Financial Services. The new organization, which CUSC did not name in its announcement of the winning ballot, will be an affiliate of CO-OP, which according to the announcement of a letter of intent in February, will own a majority of CUSC stock. The new organization will retain Carroll Beach, current CEO and president of CUSC as chief operating officer, CUSC said.
In other merger circumstances this would mean that CUSC would cease to remain its own entity. CUSC is the second shared branching network with which CO-OP will have merged. The first was the Service Center Corporation, which CO-OP purchased in 2002. SCC, the first credit union shared branch organization in the country, effectively ceased to have much of an administrative or organizational life apart from CO-OP.
But CUSC CEO Carroll Beach said that the deal CUSC made with CO-OP will allow CUSC to keep more of its independence, particularly when it comes to shared branching issues. It puts CUSC in charge of the existing CO-OP Financial Services shared branching network, consisting mostly of the former SCC network, and retains a board for five years which would have members both appointed by CO-OP and elected from CUSC member credit unions. As part of the deal, CO-OP is purchasing 51% of the ownership of CUSC and Beach said that there were advantages to having the member credit unions retain 49% of the ownership. "One thing it does is to help us keep the involvement of the leagues," Beach said. "Over the last two years we have grown by hundreds of new members because of our league involvement. Keeping a degree of ownership means that we help make sure the leagues still feel like they have some skin in the game." The new organization will represent 80% of all CUs which participate in shared branching, CUSC said, spread over 40 states, 87 stand alone shared branch locations and 75% of shared branching transactions, CUSC said.
Sarah Canepa Bang, CEO of the Financial Service Centers Cooperative, the shared branching network headquartered on the West Coast, took issue with some of the CUSC and CO-OP figures. Bang pointed out that CUSC and CO-OP can't know how many transactions FSCC does now or will do in the future and so won't know what percentage of overall transactions it will do.
FSCC also believes it doesn't do any of the shared branching networks any good to use transaction volume as a measure of size since transactions tend to be counted whenever they pass over additional switches, so in effect they are counted twice.
Issuing clarifications on transaction volume makes the whole industry look bad, Bang said, like it's not being straight up with the numbers. But overall she said that FSCC supported the CUSC and CO-OP deal and that it would be good for credit unions generally.
Her comments echoed her previous opinions, when the letter of intent had been announced and she noted that the move should be able to help more credit unions join shared branching. FSCC has long maintained, she explained, that the most important number to credit union members was not the number of credit union transactions, but the number of outlets. As the CUSC merger and CO-OP deal will help more credit unions get involved with shared branching, it would only be a good thing. The merger will also be transparent to credit union members, Beach said, though it should show up in lower fees for transactions and the ability to convey more information across the network's proprietary Next Generation switch. Beach said that CUSC staff has met with CO-OP's staff extensively and that both sides had closely studied potential technical and legal issues before drawing up a final agreement to share with CUSC member credit unions.
"This combination means great things for credit unions participating in shared branching," Beach said. "By synergizing operations with such a progressive and leading organization, we will create efficiencies that will attract more credit unions to shared branching, resulting in the ultimate member service experience."
"We look forward to working with CUSC and are proud to have it as an affiliate of CO-OP FS," says Stan Hollen, president/CEO of CO-OP FS. "Together we can shape the future of shared branching. Exciting things are ahead as we make plans to bolster the image of this service among credit unions." --firstname.lastname@example.org