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SAN DIMAS, Calif. and HONOLULU – This time it’s more than just talk – PacCorp and WesCorp have agreed to merge. The $24 billion WesCorp, San Dimas, Calif., is the nation’s largest corporate credit union serving approximately 1,000 credit unions in 33 states and Guam. The $567 million PacCorp is the primary corporate for Hawaii and Guam, serving 101 credit unions. There have been corporate mergers of noncontiguous states cropping up recently, but none have crossed an ocean like this merger. Just over a year ago Credit Union Times reported on former WesCorp President/CEO Dick Johnson’s push for a merger. Johnson proposed a merger to PacCorp President/CEO Rand Yamasaki and Board Chairman Warren Nakamura, they declined. Johnson later sent letters to Hawaii credit unions outlining the benefits of a merger. Johnson’s thrust was that with WesCorp already serving many Hawaii CUs, the merger made sense and if it didn’t happen WesCorp would wind up duplicating infrastructure PacCorp already had through personnel and a new Hawaii office. PacCorp leadership wasn’t ready for a merger, stating that the corporate was financially stable and able to compete independently. Meanwhile, WesCorp hired a full-time person in Hawaii to work with Hawaii credit unions, and said it was preparing to open an official office in Honolulu. That office never did come and when WesCorp’s Hawaii representative resigned last November to work for a Hawaii credit union, the possibility of a merger was entertained again. “With that resignation that’s where the dialogue started with their new CEO Bob Siravo and myself. Bob is a unique guy. He believes in the cooperative credit union spirit. He has a sense of family, working together to provide the best solution for our member credit unions. It was his approach that made a difference,” said Yamasaki. Mainland companies have sometimes had problems when entering Hawaii because of what many call cultural differences. Yamasaki doesn’t think that will be a problem. “There are some unique Hawaiian and Guam values. One of which is family, that we call `ohana’, doing things together, doing things unified. Togetherness and unity is the feeling of ohana here locally, which Bob exudes.” Siravo declined to comment to Credit Union Times. Former WesCorp President/CEO Dick Johnson said although it didn’t happen under his watch, he’s thrilled for both corporates. “It’s made sense for a long time. You have to respect that the Hawaii credit unions wanted to take the time to think and make the right decision. It’s going to be good for both of them,” said Johnson. Johnson said when he was pushing for a merger there were some fears among Hawaii CUs that WesCorp wouldn’t cater to the state’s smaller CUs. Home to 101 credit unions, only 13 of them are over $100 million, so small CUs rule in the state in terms of sheer number. Johnson said small CUs will have nothing to worry about. “WesCorp works very hard to help small credit unions. This is going to be good for them,” said Johnson. WesCorp wasn’t the only merger option for PacCorp. According to sources, PacCorp sent out a Request for Proposal to three corporates: WesCorp, Southwest Corporate FCU and one other corporate. Under the proposed merger, Yamasaki will become WesCorp’s Senior Vice President, overseeing the Hawaii office. WesCorp plans to maintain PacCorp’s existing Honolulu office and its 12 staffers. WesCorp already has a significant presence in the state with 51 Hawaiian CUs as members, and two Guam members. Now Hawaii CUs Get to Decide The merger now needs NCUA approval as well as majority approval from PacCorp’s member credit unions. PacCorp has sent out a letter to its members alerting them of the merger. “We are getting very, very positive reactions,” said Yamasaki. Wallace Watanabe, president/CEO of the $325 million Honolulu City and County Employees FCU, said he’s not sure just yet which way he will vote on the merger. “I feel kind of saddened because I think the smaller credit unions especially may lose something in terms of service. I think eventually the (WesCorp’s) presence in Hawaii will become less and less. Bank of America came to Hawaii and they only lasted two years. They didn’t get to learn the Hawaiian culture,” said Watanabe. He said he feels especially close to this because he served on the PacCorp Board for nine years and became very fond of the corporate. “I really have mixed feelings.” Milton Lum, president/CEO of the $83 million Hawaii Central CU, thinks the merger will benefit Hawaii credit unions. “I sense that it should be a positive move. It sounds like the officials of the two institutions have talked a lot and there’s a meeting of the minds. If there’s a commitment to Hawaii, it should be good,” said Lum. According to Yamasaki, personal service is the hallmark of PacCorp and he is confident that will continue under WesCorp. PacCorp is unique from other corporates in terms of some of its services, such as strategic planning facilitation, assisting boards with governance, and working with the operational staffers at credit unions. Those are traditionally more league-driven services, rather than corporate-driven. Yamasaki said these types of services may be expanded to WesCorp’s membership. WesCorp of course brings tremendous economies of scale to the table. Investment and overnight account rates for Hawaii and Guam CUs will immediately improve if the deal is completed. As for new services, Yamasaki cited WesCorp’s loan participation, broker-dealer, and small business services -things PacCorp doesn’t currently offer. “It has a lot of possibility. WesCorp has good products and services they can offer. PacCorp has a lot of good one-on-one service. This can pull it all together,” said Mark Yamane, president of the $37 million Hawaii Pacific FCU. Yamane said he doesn’t have any problems with mainland organizations, but says some in Hawaii might, mainly because of logistics. “They’ve had experiences that may have not been as good. A lot of it’s because of time zones and doing everything over the phone,” said Yamane. Yamasaki said WesCorp’s California time zone was a factor in choosing them as a merger partner. Other Hawaii CU CEOs are taking a wait and see approach. “I’m reserving my opinion to kind of hear what the merger will do for the credit unions here in Hawaii and for our credit union in particular. I’m trusting that the PacCorp Board has done its due diligence and is making the right decision for the benefit of all of us,” said Gary Fukuroku, CEO of Maui County Employees FCU Yamasaki said the vote will likely be done by mail ballot, but first PacCorp will hold an informational meeting on August 20 in Honolulu to answer member questions. (See box on this page.) “I think this merger is a no brainer. The `little corporate that could’ becomes part of the largest credit union institution in the U.S. Better rates, more services and the backing of a huge staff with a wealth of knowledge,” said Ron Ogata, chairman of the Hawaii CU League and former CEO of HawaiiUSA FCU. “I did a quick survey of small and large credit unions of what their thoughts were. Everything is very positive. Most of the large credit unions are already members so this is not a big to do,” said Ogata. Ogata was in favor of the merger the first time it came up. His former credit union, HawaiiUSA FCU, was the first to join WesCorp over 15 years ago. “I found out their services offered to California credit unions were something I could not pass over. We joined them immediately and found that their Overnight Funds Rates and other investment rates were unbeatable,” said Ogata. Ogata credited Siravo’s work for getting the deal done. There are always many account structure details to work out with a corporate merger. According to the letter sent to Hawaii CUS, Hawaii CUs’ Membership Capital Accounts will transfer to a similar MCA account at WesCorp once the merger is done. WesCorp will eventually adjust those balances in accordance with its policies – the greater of one-eighth of 1% of a CU’s most recently available semi-annual total assets amount or 5% of its average non-capital deposits held at WesCorp during the preceding six months. The letter also states that WesCorp has agreed to allow PacCorp to distribute a patronage dividend prior to the effective merger date. It will be based on PacCorp’s Retained Earnings in excess of 2.0% of moving daily average net assets for the preceding 12 months or $2 million, whichever is lower. This dividend still needed NCUA approval at press time. WesCorp will also have to work out item processing and PacCorp’s PRIZM ATM card. Both services were provided by the EDS Credit Union Industry Group, which was purchased by Fiserv. A meeting is scheduled for the end of July according to the letter. It also states that WesCorp is discussing potential ATM network deals with several major ATM card vendors and local banks. Hawaiin Uniqueness Yamasaki said one thing very different in Hawaii from the rest of the nation is the relationship between banks and credit unions. “We are open to partnering with the banks to some degree. There’s a pretty good working relationship between banks and credit unions here. I think the banks here respect the credit unions and what we’re doing. They’re realizing it’s in their best interest to partner with us,” said Yamasaki. In fact many Hawaii CUs use bank ATM networks as well as count on banks for correspondent services. Not only is Hawaii home to mostly small credit unions, approximately 75% of them are on the island of Oahu, said Yamasaki. Travel and tourism is of course the economic driver in the state. “It’s still our bread and butter. It’s down 10% right now. The Japanese aren’t traveling as much,” said Yamasaki. -

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