HOUSTON — Tom Glatt recently flew down to George Bush Intercontinental Airport to talk to ramp workers, baggage handlers and other airport employees.

The president/CEO of $182 million Continental Federal Credit Union made a visit here from El Segundo, Calif. to hear firsthand what members were saying about the recently-rejected merger proposal from $1.6 billion Wings Financial Federal Credit Union. Glatt got an earful and even some specific ways Continental could improve service.

“Here I am shaking hands with people at the branch in Houston,” Glatt told Credit Union Times via cell phone on March 23 as the hubbub of the airport could be heard in the background. “It's great to see this level of passion and commitment from the members. One of the great things was the CEO [Larry Kellner, who is also chairman of Continental Airlines] of Continental came out to speak.”

Continental FCU's board of directors voted 7-0 to reject a merger proposal from Wings Financial largely to “protect the interests of our entire membership, both short-term and long-term.” Wings Financial President/CEO Paul Parish said the CU was “disappointed” but not surprised Continental voted against its merger proposal without presenting it to their membership for a vote. True to its word, Wings Financial said it will continue its campaign launched March 9–the day it submitted its merger proposal to Continental–to encourage Continental's members to “ask for a vote.” At press time, Wings Financial still had its continentalwings.com Web site and online petition up and running.

According to a Wings Financial spokesman, “the number of petitions Wings Financial has received to this point remains in line with expectations.” When asked if the CU had a time frame in mind for how long it plans to court Continental's members, the spokesman said “It would not be appropriate to comment on the timetable for the education/introduction campaign.”

“All of [Continental's members'] concerns could be addressed if [Continental's board] would enter into a dialogue with us,” Parish said in a March 21 press release.

“Our proposal is about one thing–adding member value to both credit unions. We have no interest in a 'hostile takeover' or any of the other scare tactics being tossed around,” Parish said at the time. “Our interest–our only interest–is in informing the members of this credit union about the real value they could gain through a merger of our organizations. The rest is up to Continental FCU members. That's the essence of the credit union system and the essence of our message: 'Ask for a vote.'”

As Glatt spent time talking to members in Houston, he also took time to clear up confusion over an item in a March 22 issue of CEO Report that he had been contacted by an attorney representing a banking group with a “competing offer” to Wings Financials proposal. According to the report, “An attorney representing the group contacted Continental CEO Tom Glatt on March 15 to let the company know of its interest.” The attorney did not provide further details or identify any clients, the report read.

Glatt said he did receive a call from someone identifying themselves as an attorney with a banking group, but no offer was made to him. Glatt would not identify the name of the banking group. It was someone “representing some interest” Glatt said, adding he could not say more because he is a “little bit constrained by legal restraints.”

“We had one offer that we considered and the vote was 7-0,” Glatt said referring to Wings Financial's proposal.

He said anyone who knows him, knows his record is clear on CUs wanting to convert to banks.

“Tom Glatt is on record many times–I've talked to board members and CEOs about conversions,” he said. “If you want to steal from members, at least have the decency to wear a mask and carry a gun. It's theft. I am adamantly against any credit union starting a bank.”

Meanwhile, Continental's performance ratios have been in the negative range compared to its peers. According to NCUA data as of Dec. 31, 2006, Continental had -5.36% in share growth, -1.10% in loan growth, -3.85% in asset growth and -5.86% in investment growth. Glatt said “there's no spin to put on it.”

“I'm a CPA. I know those numbers,” Glatt said. “It isn't about concentrating on fixing the numbers but making sure members have the best experience. We do that and the numbers will take care of themselves.”

Glatt is the former president of CU consulting firm Counter Intelligence Associates and previously served as executive vice president/COO of $1.6 billion Teachers Credit Union before coming to Continental last August.

With the rejected proposal off the table, Glatt said he's eager to get back to serving members and ran through a list of new products and services they can expect this spring and summer. All of the enhancements, he said, are concrete attempts to right the ship.

“Of course, as CEO, I'm concerned about this and were looking at reversing those [performance ratio] trends,” Glatt said.

For one, during the week of March 19, Continental partnered with Credit Union 24 to offer members access to a 40,000 surcharge-free ATM network. The CU now belongs to Credit Union 24's and CO-OP Financial Services' ATM networks. In mid-April, the CU will partner with XCU Capital, a CU-owned broker/dealer and in May, will add 2,400 shared branches for member access through a partnership with Financial Service Centers Cooperative, Inc., which has linked up with 7-Eleven to implement additional shared branching services in 4,000 locations.

Glatt said three new branches are scheduled to open this summer in Philadelphia, and in Chelsea Foods, the official caterer to Continental Airlines, in Houston and New Jersey.

“We have a lot of members [at Chelsea Foods in Houston] that don't speak English and are of low means,” Glatt said. “Having this branch for them will keep them from having to go to the check cashers. We've just given them all a raise.”

Continental is also working on an arrangement with PSCU Financial Services to equip the CU's ATMs with deposit-taking services. Glatt said he received “nothing but praise” during his recent visit to Houston, but did hear some complaints about Continental's lending process and how decisions take too long because they're made out of state.

“We're looking at bringing the lending decisions into the branches by early summer,” Glatt said. “We can make the decisions locally. It's just a matter of training.”

Glatt said the plethora of product and service rollouts were not knee-jerk reactions to Wings Financial's merger proposal, but had been in the works for several months.

“We need to focus on lending and facilities. We say FOCUS–'for our credit union success.' We define success not in assets or ROA but in member satisfaction.” The Wings Financial/Continental uproar has an unusual twist. Bill Donovan, NAFCU's former senior vice president and general counsel is representing Wings Financial through Venable LLP, the widely-known Washington law firm. When contacted by Credit Union Times, Donovan said all press calls should be directed to the credit union. He said he would follow up with Wings Financial, which at one point was not responding to requests from Credit Union Times on several follow-up questions. Donovan, who joined Venable in 2005, had been with NAFCU since 1979, building up the association's lobbying presence. He was instrumental in NAFCU's lobbying successes in the Credit Union Campaign for Consumer Choice that culminated in the passage of the 1998 Credit Union Membership Access Act. At press time, NCUA confirmed that it had not received any further documentation from Wings Financial Federal Credit Union since Continental Federal Credit Union rejected its merger proposal on March 20.

The agency did not offer comment on the rejected proposal, but did confirm that both credit unions have not sent any further documentation. NCUA Chairman JoAnn Johnson has previously said that the agency focuses on member benefit “first and foremost” when considering any CU merger. NCUA's rules governing mergers of federally insured CUs require the approval of the boards of directors of both credit unions and of NCUA before a merger can occur, she added. The agency said it never received a merger plan approved by both CU boards, but did receive a “suggested” merger plan from Wings Financial on March 9. –msamaad@cutimes.com

Instant Insights /

Continental FCU Looking Beyond Wings Proposal, Planning New Products Rollout

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