TAMPA, Fla. and DENVER -- In a move possibly demonstrating the continued upheaval of trust services within the credit union industry, two of the movement's largest trust companies have announced their plans to merge.

CUNA Mutual Group and credit union-owned MEMBERS Trust Co., the nation's first nationally-chartered trust company for credit unions, and Members Trust Company of Colorado are joining forces. MEMBERS Trust would be the surviving entity and Tom Walker, MEMBERS Trust Company's president/CEO, would serve in that role following the merger, according to both companies. Members Trust Company of Colorado would convert to an operating division and Tim Kenczewicz, current CEO of Members Trust Company of Colorado, would serve as president of the division under terms of the merger plan.

In addition to $5.2 billion Suncoast Schools Federal Credit Union and CUNA Mutual, MEMBERS Trust is owned by 33 credit unions. The firm has $202 million in assets and serves 51 credit unions throughout the United States. Members Trust of Colorado is owned by nine Colorado and Wyoming credit unions, Credit Union Strategic Partners (a subsidiary of the Credit Union Association of Colorado), and SunCorp Corporate Credit Union. Members Trust of Colorado has $120 million in assets and provides trust services to seven credit unions in Colorado.

Boards at both companies have approved the merger, but it is still subject to approval by shareholders, the Colorado Division of Banking, the Federal Deposit Insurance Corp. and the Office of Thrift Supervision. At press time, the application had not been submitted to regulators and as a result, few details are being released about the motivation behind the proposed merger and the logistics of it all. Discussions to merge began in January and "economies of scales" prompted the two entities to align, according to Tom Walker, president/CEO of MEMBERS Trust. While Kenczewicz will remain on after the merger, Walker could not talk about what would happen to other Members Trust Company of Colorado executives and whether they would have to relocate to MEMBERS Trust's headquarters in Tampa. "[The merger] will strengthen the industry," MEMBERS Trust said in a statement. "It's fairly clear that the benefits are you're taking two different companies--one on the East coast and one on the West coast--and combining experienced staff to continue the mission of serving credit unions."

The seven credit unions currently being served by Members Trust Company of Colorado will be eligible to receive services from the new entity, according to Walker.

Meanwhile, due to the standard regulatory application process, MEMBERS Trust is not expecting any concrete movement on the merger plan this year, Walker said. It's likely that the merger could be approved in 2007. Pending approval, Walker said it would take approximately six months to roll Members Trust of Colorado's operations into MEMBERS Trust.

It's been a rocky road for trust services in the credit union industry. Some experts say the slow acceptance among credit unions and members, for that matter, is tied to breaking down the myth that trust services are only for the ultra wealthy. Others contend that the five- to seven-year stretch that it often takes to build relationships is also a hindrance. Last year saw the shutdown of several notable outfits. The $996 million Arrowhead Credit Union closed the doors on its subsidiary, Arrowhead Trust Inc., after a 10-year run. The CUSO had experienced back-to-back years of slowed profits. The Delaware Credit Union League's CUSO ended its partnership with INA Trust, fsb after four years mainly because the state's credit unions were not gravitating towards bringing trust services to members. Other credit unions have quietly said trust services' growth has been "modest" at best.

Still, for the most part, credit unions continue to believe there is a viable segment of their memberships that desire trust services given the trillions of dollars that will transfer from one generation to the next over the next decade. It is estimated that the personal net worth of Americans over age 50 is between $12 trillion and $15 trillion, which amounts to 70% of all personal wealth. A 2004 study from the National Institutes of Health found that a substantial number of people expect to leave a bequest of significant value--68% are inclined to believe they will leave $10,000 or more and 62% are inclined to believe they will leave $100,000 or more. --msamaad@cutimes.com

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Economies of Scale Prompt MEMBERS Trust, Members Trust Company of Colorado to Merge

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