DULUTH, Ga. – The Georgia Central CU/Southwest Corporate FCU merger has been nixed because of problems related to achieving one of Georgia Central CU’s original merger goals -returning equity to its members. When the merger was announced this May it included a number of unique aspects. It was a merger of corporates from noncontiguous states; the merged corporate was planning on assuming a new, nongeographical name; Georgia Central sent out an RFP for a merger partner; and Georgia Central said it planned to dividend out its retained earnings to its member CUs prior to the merger closing. It’s that last issue where problems arose. “We negotiated a proposal with Southwest for the RUDE (reserves and undivided earnings) to be returned in some part, parcel or fashion to members of Georgia Central now or in the future. It turns out that was easier said than done,” said Allen Carver, interim president/CEO of the $1.5 billion Georgia Central CU. “What we were trying to do was not easily accommodated under Georgia state regulations. It certainly wasn’t anyone’s fault, that’s just the cards that were dealt to us,” said Carver. He said Georgia Central did tons of research and called in specialized lawyers from across the country to help out, but in the end the advice it was getting was that this would be too tough to achieve under current regulations. Carver said the issue is inherently “thorny.” Trying to strike a balance between CUs that have different histories with the corporate isn’t easy. “You have to figure out how to split the pie up. You have someone who has been a member for 16 years and has $50 million invested, and someone else for six years with $3 million. Could not iron out the details of treating everyone equitably. The devil, as they say, is in the details.” Georgia Central also couldn’t go into the merger empty-handed. It had to bring a certain amount of equity to Southwest Corporate. When the Georgia Central CU Board could not find a way to return equity to its members, it voted at its November 16 meeting to call off the merger. Carver said the board’s decision had nothing to do with any other issues surrounding the merger. “There were certainly no problems between the boards or the executive teams. We all got along together quite nicely,” said Carver. Bob Rehm, senior vice president of marketing and sales for the $6 billion Southwest Corporate, said Southwest is disappointed. “We were looking forward to serving Georgia credit unions. I think both parties thought we really match up well,” said Rehm. Rehm said Southwest wasn’t asked to help Georgia Central out with its equity issues. “That was really their issue. It was between Georgia Central and its members. From the beginning it was their intent to return (equity) to their members,” said Rehm. Returning equity to member CUs of the acquired corporate has come up in the past. A CEO of a Washington credit union asked what members of Washington Corporate FCU would get back after years of supporting their home state corporate once the merger with Northwest Corporate was finalized. That merger was completed without addressing that issue. “It came up with a couple of the members, but it was never part of the deal. I did talk to NCUA at one time about it,” said Kathy Garner, president/CEO of Northwest Corporate CU. Garner said NCUA at that time had no formula for doing it, and it would likely have to be very conservative if it were to be done. “You know how NCUA feels about capital at a corporate.” Having been anticipating a merger for the last six months, both corporates now must move on with their individual plans. “We move to continue as a stand-alone corporate. We wish the very best to our friends at Southwest,” said Carver. Carver said moving on won’t be hard since Georgia Central has kept things business as usual. “We certainly didn’t take a hunker down mentality or one assuming we were not going to be in business as of first quarter 2002. We served our members as if we were going to be here forever. That was the strategy.” Georgia Central is in more of a transition stage than Southwest Corporate in that Carver is an interim CEO and the board now has to look for his permanent replacement. Shortly after the Georgia Central/Southwest letter of intent to merger was inked, Dave Preter, then Georgia Central CU CEO, announced his plans to leave to take the reigns at Mid-States Corporate FCU where long-time CEO Don Finn had announced his retirement. At press time, Preter could not be reached for comment. Carver emphasized that there’s no chance he will stay on as Georgia Central CEO. The long-time NCUA employee now heads a successful credit union consulting firm, Allen Carver & Associates. “My little consulting business is doing quite well. I have responsibilities there. I’ve urged the board to do an executive search. I’ve urged them to cast a wide net. I will stay here as long as they need me.” Allen Carver & Associates specializes in strategic planning and consulting on community charters and mergers. Carver said there’s been no discussion of the merger possibly being revisited if the equity situation could be worked out. Rehm said Southwest would be open to revisiting the merger. “That hasn’t been discussed, but we’re open to that. We’re certainly open to merger discussions with other corporate credit unions. Now we’re just moving on with business as usual. We have opened our item processing center in Jacksonville. That goes toward our intent of continuing to be active in that part of the country.” Interestingly, at press time, Southeast Corporate FCU was scheduled to open its item processing facility in Jacksonville in just a few days. Rehm also said Southwest has been operating normally, so it won’t need to make many adjustments because of the failed merger. “We didn’t’ change any staffing or any marketing decisions. Obviously if we would have merged there would have been some changes.” As for that new nongeographical name that would have come to life if the deal went through, both parties said that name hadn’t been decided on. -

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