NAPERVILLE, Ill. – Just when it looked like maybe, just maybe the pace of corporate CU mergers was slowing, a blockbuster deal surfaces. The $4 billion Mid-States Corporate FCU, Naperville, Ill., and the $800 million Minnesota Corporate FCU, Eagan, Minn., are the latest two corporates to announce merger plans. Mid-States would cement its position as the third largest corporate behind WesCorp and Southwest Corporate FCU. Mid-States and Empire Corporate FCU have traded the three and four spots in recent years. With the recent closing of the SunCorp/Nebraska Corporate deal (see story page 3), this merger would drop the number of corporates to 32. Minnesota Corporate FCU initiated this deal. Its board decided at its planning session last Spring that a merger would be best for members. It sent out an RFP and looked at four corporates seriously before selecting Mid-States. Lewis Lambert, president/CEO of Minnesota Corporate FCU, said he and the board were concerned about the corporate's future. "We looked at the horizon and saw our ability to compete could be diminished over time. We built a great corporate, rooted in strong support of our members. We did not want to see that foundation be eroded over time," said Lambert. NCUA's new corporate reg also played a part said Lambert. With the new investment powers, Minnesota Corporate wanted to find a way to take advantage of all of them. "A lot of it ties back to the expanded investment authority. We did not have the internal infrastructure to have the expanded authorities. Mid-States already has two out of the four and they plan to have them all by 2003," said Lambert. Lambert said he's excited by the "merger in-place" concept the two corporates are initiating. What does "merger-in-place" mean? Essentially, said Lambert, that the corporates are going to take things real slow to ensure it's done right. The plan is for Lambert to become President of Minnesota Operations and to continue to work out of the corporate's current headquarters in Eagan. All 17 Minnesota Corporate employees will be retained. Dave Preter, president/CEO of Mid-States Corporate FCU, said his corporate does not like to go into other corporates' states and aggressively market to their members, so a true partnership with Minnesota was the way to go. Preter, an advocate of cooperation among corporates, said his corporate plans to do this merger in a high-class way. "We're not going to flip a switch and change the lives of credit unions in Minnesota overnight. It might take two years for us to really change our operations," said Preter. But there will be immediate benefit in the form of better rates and expanded products. Preter said the board has recognized that mergers are a legitimate way to provide better products and services to members. "I think the Mid-States board, when it made the INDICORP merger, foresaw the direction of corporate credit unions. That was to gain economies of scale, gain infrastructure. We want to gain expanded authority granted by NCUA, and expand our tech infrastructure. We're all spending a significant amount of money in these areas. As a wholesale provider you have to be able to leverage that economy of scale," he said. This merger isn't the only change for Mid-States. Preter also said the corporate is in the process of hiring a business development professional to deal with Ohio credit unions, in the home state of Corporate One FCU. Preter said Mid-States can no longer ignore the aggressive position Corporate One has taken in Mid-States two primary states, Illinois and Indiana. Corporate One has been very public in that stance. "The aggressiveness of Corporate One in our marketplace has caused some reaction by Mid-States. It triggered some target marketing in 2002. We've learned about Ohio credit unions, and they've asked us to play a bigger role in the state. It's not our choice necessarily. We prefer to do things like we are doing in Minnesota," said Preter. Preter said Mid-States tried to develop partnerships with Corporate One, however deals didn't work out. Specifically, Preter said Corporate One wouldn't partner with Mid-States to allow it to offer Corporate One's popular SimpliCD program. That's an interesting rejection given that Corporate One partners with 15 other corporates to provide SimpliCD in their states. Mid-States plans on developing a new CD product and also sell off balance sheet products through a new in-house brokerage it hopes to open next year. Corporate One FCU VP of Marketing Mike Paton said he is unaware of any serious conversations between the two corporates on the SimpliCD product, and Corporate One is ready for the competition. "We welcome any competition in our state or anywhere else that gives credit unions the ability to choose the best solution. We focus on credit unions. Competition is a byproduct of focusing on credit unions. It's not our intention," said Paton. Paton also said that Corporate One FCU became a lot more aggressive in Indiana by request of Indiana CUs which were unhappy with the INDICORP/Mid-States merger. Another sidelight of this merger is that Minnesota Corporate was one of the corporates included in Missouri Corporate CU President/CEO Dennis DeGroodt's proposal to create a Midwest regional corporate (see story page 3). Lambert said Minnesota Corporate and four other corporates did a study last year on the feasibility of that concept, and found the benefits weren't there. Lambert said he was surprised to see the concept being brought up again. "We had already dismissed that concept and had already moved ahead in the process to finalize our RFP for a merger partner. Then they came out with the Midwest regional proposal. That concept just didn't fit for us. We were looking at being part of a much bigger corporate that already had the infrastructure in place," said Lambert. With the recent closing of the SunCorp/Nebraska Corporate deal, this merger would drop the number of corporates to 32. [email protected]