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NEWTOWN SQUARE and THORNDALE, Pa. – If everything goes as planned, Pennsylvania will have a new almost $1 billion credit union by early 2005. The $293 million, 32,700-member Atlantic CU, Newtown Square, Pa. and the $653 million, 85,000-member Citadel FCU, Thorndale signed a letter of intent last month to merge. The credit unions still have to file their application to merge with the State Department of Banking, receive regulatory approval and hold a vote of their respective memberships. Assuming everyone concerned gives the merger their thumbs up, the new credit union, which will retain the Citadel name, will have approximately $950 million in assets, serve over 100,000 members, and employ more than 300 people – making the new Citadel FCU the second largest credit union in the Philadelphia area and the third largest in Pennsylvania. Citadel FCU president/CEO Jeff March will remain CEO of the new CU, and Atlantic CU president/CEO Bob Edmondson will serve as president/COO when the merger is completed. Emphasizing that the merger is not a done deal yet, Edmonson said the seed for it was germinated a year ago when Atlantic did a scenario planning exercise and determined in order to achieve its growth objectives, it needed to seek a community charter. Atlantic CU was chartered in 1936 as a single sponsored credit union for Atlantic Refining Company. The company name was eventually changed to Atlantic Richfield Refining, and in the 1980s the credit union expanded its field-of-membership to include multiple select employee groups. The CU’s field-of-membership currently includes 270 SEGs. Edmonson says the CU’s annual growth has been between 2-3%, “but we needed to be growing faster, and we had hoped a community charter would have been a way to achieve that.” But attempts by other state-chartered credit unions seeking to expand their FOMs to community charters have been blocked by banks – Pennsylvania bankers challenged community charter FOM expansion applications of Freedom CU, Tru-Mark Financial CU, and Corry Jamestown CU, charging the areas the CUs applied to expand to serve did not qualify as a `well-defined, local community, neighborhood, or rural district,” as defined by state law. Hearings were held July 8-12 – they were closed to the public and a hearing officer for the state Department of Banking issued a gag order. After that both sides were invited to file briefs and then each side was given the opportunity to respond to the other side’s brief. The filing deadline for briefs was Oct. 7 and deadline for responding was Oct. 18. To date, the matter sits with the Department of Banking to make a determination. “We’ve been advised by the banking department back in October when the last round of briefs were filed that they were hopeful we’ll have a decision by Thanksgiving,” said Mike Wishnow, SVP Communications and Marketing for the Pennsylvania Credit Union Association. He added that “that is not a hard and fast date, but we are optimistic the Department will issue its decision by then.” With the Department of Banking’s decision still up in the air, Edmonson said Atlantic “never applied for a community charter because the three credit unions ahead of us haven’t gone anywhere with their applications.” Another determining factor in Atlantic CU’s decision to approach Citadel FCU on a possible merger had to do with a recommendation the CU received to build another facility in Chester County. Edmonson said Atlantic CU already has one branch located there, “and we were trying to decide on a site to go with. But without a community charter, building a second branch there didn’t make sense.” Atlantic eyed Citadel as a merger partner for several reasons. First, it’s the largest credit union in Chester County and has a community charter. In addition, Edmonson said Citadel has a strong brand recognition in their marketing area. Atlantic and Citadel use the same data processor – USERS – and Edmonson said that will help towards making the transition after the merger go smoothly. The two CUs also use similar mortgage and accounting software. In addition, Atlantic is a client of Citadel’s wholly-owned indirect lending CUSO, Members Finance Auto (MFA), which generates and processes auto loans for Atlantic. Edmonson emphasized that the decision to merge Atlantic CU into Citadel FCU “was driven by members’ needs. The upside of the merger is it will allow us to expand and have a community charter faster and more efficiently. If you think it’s a good thing for members for us to have a community charter, which we do, then we’ll be achieving this.” Other benefits to members include an expanded ATM network and lines of business in areas such as investments and insurance, additional services including check imaging and on-site visits, access to more contact center representatives and additional branches – Atlantic currently has three branches, and those will be added to the nine that Citadel already has. More importantly, says Edmonson, “being a nearly billion dollar credit union will give us tremendous economies of scale.” The merger of the two credit unions also fits with the goals of Citadel’s three-year strategic plan, says Citadel FCU SVP Mike Schanbly. Those goals include growing the CU’s market share, penetrating existing relationships, and maximizing member and employee satisfaction. “We were evaluating ways to achieve those goals when Atlantic approached us about a merger. So the merger is driven by elements of each credit union’s strategic plan,” he said. Citadel’s merger with Atlantic is not the first merger for the credit union – it has done some emergency mergers at NCUA’s request in the past, most recently with Reynolds FCU, Downingtown, Pa. – but it’s Citadel’s first merger for non-emergency purposes “and the first one of this significance,” said Schanbly, emphasizing that “Citadel would not have gone out to look for a merger partner to achieve its strategic goals.” The 13-member board of the surviving Citadel FCU will include six members of Atlantic’s board and seven of the current Citadel board. One decision that is still undetermined is what Atlantic will do with its operations center in Newton Square if the merger goes through. Edmonson said the CU leases the space, and it hasn’t decided yet what it will do with that facility. -

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