Go big or go home. Those five words outline exactly what ishappening with the proposed merger of $1.8 billion Warrenville,Ill.-based Alloya with $1.5 billion Southfield. Mich.-basedCenCorp. It's a marriage of corporate credit unions that, ifapproved by CenCorp members and regulators, will produce an entitywith assets of around $3.3 billion and 1,400 members.

That would place Alloya, which will be the name of the mergedinstitution, in the top tier of corporate credit unions,along with other members of the $3 billion club (Columbus,Ohio-based Corporate One, Irondale, Ala.-based Corporate Americaand Middletown, Pa.- based Mid-Atlantic).

And this may be just the first in a new round of mergers, saidJohnFiore,CEO of Motorola Employees Credit Union, an $800 million institutionin Schaumburg, Ill. An Alloya board member, Fiore said, “We knew wehad to seek ways to grow, and that is hard to do one credit unionat a time.” He added, “The number of corporates is shrinking by theminute. I think you will see more merging. What's available may notbe there.”

MarvinUmholtz,an Olympia, Wash.-based credit union consultant, echoed thosepredictions. “You will see more mergers. Corporate credit unionsare fighting to stay relevant.”

Agreed DennisDollar,a onetime NCUA board chair who is a Birmingham, Ala.-based creditunion consultant. “We have been predicting additional corporateconsolidation, and this merger is certainly consistent with thatexpectation. When it is all said and done, there will probably beabout six to eight corporates. Like the Corporate One-Southeastmerger immediately preceding it, this is a merger of largerplayers and seems to make very good sense.”

And there is a to predict yet more mergers. “Do the math.Corporate credit unions have to scale to succeed,” said ChuckFurbee, CEO of Alloya. “Membership numbers are shrinking, largernatural person credit unions have been leaving corporates, and thecorporates that remain will have to scale,” said Furbee.

Probably the most interesting part of the merger announcement isthat upon completion, which CenCorp CEO Bill Walby predicted for November,  it is Walby who willassume the CEO job of the combined institutions.

Furbee, who will retire, applauded that. Frequently, saidFurbee, mergers hit snags because neither CEO wants to step down.Not in this case. “We had started a search for a successor to me,”said Furbee, who had indicated a desire to step down. “We built upa list of candidates that included Bill Walby. He and I chattedwhen the news of the Catalyst acquisition of Western Bridge cameout. We stayed in touch. This seemed to be the right time.”

Both Alloya and CenCorp had been bidders for the Western Bridgeremains, a contest won in December by Plano, Tex.-based Catalyst (which itself had a tickover $2 billion in assets, per its latest report).

For his part, Walby, in an interview with Credit UnionTimes on the day of the merger announcement, said, “We are ina scale business. Check processing is losing value. We can get muchmore efficient if we put the back offices together.”

“We will look at other mergers,” he added. He stressed that thetop priority on his to-do list will be securing the neededapprovals for the Alloya-CenCorp merger and planning an efficientintegration of staff and services, but he left it clear that moremergers may well be in the Alloya plans.

Alloya plans to maintain three main offices–the Warrenvilleheadquarters, an Albany, N.Y., center, and the present Southfieldbase of CenCorp. The latter is where Walby personally plans to bebased.

As part of the merger agreement, CenCorp will pick up four ofthe present 11 board seats at Alloya, said Fiore.

Fiore, incidentally, offered a history lesson on corporatecredit union mergers. “This isn't the first time these institutionstried to merge,” he said. Back in 1997, recalled Fiore, Mid-StatesCorporate, which later was merged into what became Members Unitedwhich begat Alloya, “had merger on its mind and we signed a letterof intent to merge with CenCorp. It never happened. It was a goodmatch for us,” said Fiore who had also served on the Mid-Statesboard. “It's still a really good match for us.”

He added: “To make a merger like this work, both boards have tobe fully aligned. We now have that with CenCorp and Alloya.”

As for league reactions to the Alloya-CenCorp merger, Dave Adams,CEO of the Michigan Credit Union League, said, “Consolidation ofcorporate credit unions continues due to new restrictions on theirbusiness model. This appears to be an excellent merger for thecredit unions served by these two corporates. Economies of scaleand skill will drive future success for corporate credit unionsunder their more regulated business model.”

William Mellin,CEO of the Credit Union Association of New York, in a pressstatement added his organization's blessing to the proposed merger.“ I am confident that a unification of these two corporate creditunions is in the best interests of our credit unions here in NewYork and beyond. It will provide long-term strength and viability,not to mention long-term value and a continued service presence inNew York.”

Industry experts asked to handicap the probability that theAlloya-CenCorp merger will win all necessary approvals indicatedoptimism. They suggested that the real focus belongs on probableadditional mergers that may be announced before the year isout.

“These mergers are being driven by two factors–the consolidationof business strategies in order to be positioned to gain sufficientearnings to meet the new NCUA capital standards and the demand fromnatural person credit unions for more viable corporate businessmodels before they will invest their capital again,” saidDollar.

Eyes now are shifted to yet another reshuffle of the corporatedeck, one where the future of smaller, regionalized institutionsseems more questionable, said experts, as scale has emerged as theformula for surviving in a world where the benchmarks are set byever bigger financial institutions.