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BLOOMINGTON, Ill. – Rarely does the industry see a merger of the multi-billion dollar asset magnitude among two credit unions – let alone a dozen of them – but if the credit unions that serve State Farm Insurance get the green light, that fusion may become a reality sometime this year. On March 1, NCUA said it received the merger application from the credit unions. Combined, the credit unions, which are located in 20 states, have $2.94 billion in assets and 136,000 members, said Tom DeWitt, president/CEO, State Farm-Great Lakes FCU here. If approved, the new credit union, which would be called State Farm Federal Credit Union, would quickly move up the ranking among the nation’s top 15 largest credit unions. The credit unions involved are: State Farm California FCU, Bakersfield, Calif.; State Farm Central FCU, Columbia, Mo.; State Farm Florida FCU, Winter Haven, Fla.; State Farm Great Lakes FCU, Bloomington, Ill.; State Farm Great Western, Tempe, Ariz.; State Farm Heartland FCU, Lincoln, Neb.; State Farm Mid-America FCU, Newark, Ohio; State Farm Mid-Atlantic, Frederick, Md.; State Farm Northeast, Ballston Spa, NY; State Farm Pacific Northwest FCU, Dupont, Wash.; State Farm Southern FCU, Duluth, Ga.; and State Farm Texas FCU, Austin, Texas. DeWitt would be the CEO of the new CU and the other 11 CEOs would remain on as managers. Boards from all 12 CUs have already approved the merger, DeWitt said. One board member would be selected from 11 of the CUs and four board members from State Farm-Great Lakes FCU would remain on the new 15-member board. Each CU is single sponsor-based with none of them having any select employee groups. “The reason for the merger is to allow for enhanced operating efficiency and improve our ability to service members,” DeWitt said. “Members will be able to access branches nationwide.” DeWitt said the merger will also eliminate individual credit unions having to do any restructuring to keep pace with region or zone realignments done by State Farm Insurance. The insurance giant has 12 zones in the United States and one in Canada. Several years ago, there were 26 State Farm FCUs but as a result of the insurance company zone restructuring, there are now 12 CUs and one in Canada, which will remain independent of the merger, said DeWitt, who has been with State Farm-Great Lakes FCU for 15 years including the past 10 years as CEO. DeWitt said NCUA is currently reviewing the application and officials at regional offices have indicated that they might have a decision in 30 days. NCUA said it is currently doing a cursory review of the application but it’s too early to say when the regulator will make a final decision, said Cherie Umbel, spokeswoman. The application was probably not an unexpected jolt for NCUA since credit union executives did meet with officials at NCUA’s Region IV office in Austin, Texas last year for preliminary talks about the merger, Umbel said. It’s still too early to tell when NCUA will have a decision because the regulator will have to look at the business plan and the respective credit union operations. “There are many of them across the country,” Umbel said. For its part, State Farm Insurance, considered to be among the largest insurer of cars and homes in the United States, is supportive of the move, said Fraser Engerman, spokesperson for State Farm. Founded in 1922, the $50.2 billion insurance giant has more than 70,000 employees and 16,000 agents throughout the U.S. and parts of Canada. Employees of the credit unions are employees of State Farm Insurance. “We believe the merger is the right thing to do,” Engerman said. “The company definitely supports it.” The first credit union to serve State Farm Insurance formed in 1946. Since then, it really has not deviated from a fairly plain vanilla product and service offering. Besides shares and consumer loans, there’s nothing else beyond that, DeWitt said. Automated teller machine cards are currently not issued. One highly sought product offered through the credit unions is the insurance company’s benefits program. For now, one of the goals is to ensure that services and products are consistent at each branch, DeWitt said. Certificates of deposits and individual retirement accounts may need to be added at some branches. Still, “it is not our intent to add more products,” DeWitt said. “But (this proposed merger) does position us to consider adding down the road.” To say the least, it seems an onerous, complex and multi-layered task to bring 12 credit unions together into one entity. All of them use separate core systems through Harland Financial Solutions, Inc., so getting everyone on the same page might not be as complicated versus what it would take if there were multiple processors. Research, development and marketing systems would be shared by all of the credit unions, as will the 26 branches nationwide. The idea of merging the credit unions has been bandied about for at least three years, DeWitt said. State Farm Insurance operates 25 operation centers in 13 zones and over the years, the company has restructured its regional locations. To keep service alignment, some of the credit unions would have to merge. Among the latest was when State Farm Great Lakes FCU merged its Indiana and Michigan operations into its Bloomington operations. That merger resulted in an increase of 35,000 members and assets growing to $678 million in 2004, from $505 million in 2003. “Any future realignment by the company won’t be impacted by us,” DeWitt said. If NCUA approves the merger, the credit unions will move forward with holding a special meeting to allow members to vote. “We’re not anticipating any problems with member votes,” DeWitt said. “The key here is nothing is really changing for the members (except an improvement in operations’ efficiencies and national branch access).” DeWitt said the consolidation will be a good thing for the long haul. “We are a single sponsor credit union, (State Farm Insurance) has endorsed this and we’re looking forward to having one policy to enhance member service,” he said. [email protected]

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