When I joined the corporate credit union network just over 10years ago, I was basically unaware of this segment of the creditunion system. Of course, I was familiar with my local corporate,but I had never actually heard of the “corporate credit unionnetwork” as such, or of the term “natural person credit union.” Atthe time there were 44 corporate credit unions serving specificfields of membership with minimal overlaps. Diversity of productofferings was limited. Roughly half of the corporates hadintegrated management teams with state leagues. Most corporatesoperated profitably by taking spreads on matched investment booksand keeping expenses down. There were approximately 13,000 creditunions operating across the country. Things were going well, or sowe thought. Jump ahead to 2004 where we now have 29 corporatecredit unions plus U.S. Central Credit Union and the number ofnatural person credit unions has dropped to about 9,300. All ormost corporates have national fields of membership. All areoperated independent of state leagues. NCUA oversight which reachedsomewhat of a fever pitch in the mid `90s has mellowed into a morefamiliar regulator-regulated tension. Total capital within thecorporate network has more than doubled as have assets undermanagement. Product offerings have diversified greatly. So whatwill the next chapter bring us? In the face of shrinking numbers ofcredit unions, what are the implications over the next 5-10 yearsfor the corporate network? Industry consolidation is, of course,always the first response; however, with all that's changed overthe past 10 years the argument could be framed as follows: whyhaven't there been more corporate mergers? Ever since corporatemergers began occurring in 1995, the network has debated the“proper” number of corporates. Predictions run the gamut from onlya handful to several dozen. If bigger is always better, why notjust one corporate and for that matter why not just one creditunion per state? Think of the potential savings in personnel andother operating expenses. And think of the reduced volunteerexpenses and reporting to multiple boards of directors andcommittees. Well, for one thing it's not that easy or desirable. Asthe credit union landscape was shifting, corporates figured outpretty quickly that change was needed for continued viability andvalue to their members. Some corporates determined that merging wasthe best long-term solution for serving their members. Many othersconsidered the proposition and decided to remain independent. Allcorporate boards have at least discussed the option. Through thisprocess of self-evaluation, corporate credit unions have becomefinancially and operationally stronger than they were 10 years ago,regardless of asset size. Regulatory changes and member demandshave forced corporates to improve their market rate competitivenessand payment product efficiencies. Innovation and creativity withinthe corporate system is not a by-product of any specific sizedcorporate, it is a product of the many talented people in thecorporate system whose interests are in serving credit unions. Newcooperative efforts are emerging constantly in an effort to reduceexpenses and provide new services to credit unions. Service andunderstanding of specific member needs is still a critical aspectof every corporate relationship with its member credit unions.Price competitiveness is a given. As long as corporates can meetthese thresholds, they will remain viable. In the end, the numberof natural person credit unions will determine the ultimate numberof corporate credit unions. Increasing technology and systems costswill constantly put pressure on corporates to be more creative inremaining a competitive option. As the numbers of credit unionscontinue to diminish, corporates will be forced to maintainearnings margins and services for fewer and fewer end users. Theremaining credit unions will be larger, more sophisticated, andmore self-sufficient in their operations. They will, however,continue to need trusted partners. Over time, the remainingcorporates should actually increase in value to their member creditunions. As the number of member owners shrinks, the control andinput into the direction of corporates will become more focusedstrategically and product-wise. The value of member ownership basedsolely on the ratio of retained earnings to member capital willcontinue to increase as the actual number of credit unions drop.Corporates will become more specialized in what they offer in-houseand more willing to give up control to consolidate majorinitiatives that require extensive resources and capitalinvestment. Some corporates may offer only a couple of nicheservices while others may be more full-service. They will reflectmore directly the needs of their member-owners. The fact that acredit union can utilize the services of any corporate will lead toonly best-of-breed services remaining in-house at only the mosteffective providers. To some extent this openness may slowcorporate consolidation as it forces corporates to recognize theycan not be all things to all credit unions and will thereby focusonly on what they can do best for their members. The corporatecredit union system will become more specialized, flexible, andresponsive. As corporate credit unions go through this transition,the system will be far stronger having more than just a handful ofcorporates leading the change. I do not know how many corporateswill or should survive in an industry in the process ofconsolidation. I do know that the number of natural person creditunions will continue to shrink and perhaps at much faster numbersover the next several years. I also know that in making my owntransition from natural person credit unions to the corporatesystem, I have come to recognize the incredible asset credit unionspossess in the corporate system and what a waste it would be werethey to ignore its potential. In many ways, the corporate systemepitomizes the cooperative spirit of shared resources within thecredit union system. Large and small credit unions all helpcapitalize corporates and all have a financial stake in theirsuccess. The services offered appeal to a broad audience of creditunions, and all credit unions have the ability to be involved withthe governance process of corporates. Unfortunately, corporatesoften operate below the radar of many of the most influentialcredit unions. Often corporates are not at the table when newsystem solutions are discussed among credit union leaders. Perhapsthe process of consolidation within the credit union industry willhelp bring corporates back to the level of visibility and valuethat the credit union visionaries who started this unique systemoriginally envisioned.