HANSCOM AFB, Mass. - In one of the state's biggest mergers inyears, the $461 million Hanscom FCU is merging with the $90 millionMilestone FCU of Burlington creating the ninth largest credit unionin Massachusetts.

Management of Milestone, a former single sponsor CU withbranches in Massachusetts and Virginia, said a merger with a largerpartner had been sought since last October based on a view thatmedium size CUs require more financial strength to compete intoday's market. The two CUs, with a combined membership of 42,000and 14 branches, will be united under the Hanscom FCU charter onJune 30 following certification of the members' vote by NCUA.

"This merger is a proactive step by two healthy financialinstitutions," said Paul Marotta, chairman of Hanscom, founded in1953 to serve employees of the Air Force Research Lab in Cambridge,Mass.

Milestone was chartered in 1959 to serve employees of MitreCorp., a nonprofit high-tech firm serving government agencies.

Officials said both CUs maintain a similar base of governmentemployees with some member overlap.

However, Milestone management said that after a strategicconference in October of its management, directors and staff it wasclear that most believed the only means for the CU to survive inthe future was to merge with a larger partner. "When you look atwhat has happened in the last five years with Netbank, the CharlesSchwabs, Bank of America and the challenges to small credit unionseverywhere, you simply have to be realistic about your future,"said Steve Silva, vice president of marketing and businessdevelopment at Milestone.

More than a year ago, said Silva, Milestone, which is nowSEG-based, had looked at grouping together like-minded, smaller CUsin Massachusetts in a merger. That came after a 2004 merger withAGFA CU, a smaller Massachusetts CU. However, management soonrealized that a CU in the $500 million asset range would be morefeasible. "We had only had four employees at our McLean branch," sothe lack of a presence in Virginia ruled out scouting for a mergerpartner in that state, said Silva

Once the CEOs of Milestone and Hanscom began talking, theyrealized the mutual benefits of a merger to members.

One such advantage, said Hanscom, is in allowing its members toapply for mortgage or home equity loans in all 50 states, wherepreviously they were limited to New England properties.

Also, said Hanscom, the merger allows broader access to thenetwork of 65,000 surcharge-free ATMs. "Our members will havebetter access than customers at many of the large national banks,"said Marotta, the Hanscom chairman. [email protected]