HOUSTON — Tom Glatt recently flew down to George BushIntercontinental Airport to talk to ramp workers, baggage handlersand other airport employees.

The president/CEO of $182 million Continental Federal CreditUnion made a visit here from El Segundo, Calif. to hear firsthandwhat members were saying about the recently-rejected mergerproposal from $1.6 billion Wings Financial Federal Credit Union.Glatt got an earful and even some specific ways Continental couldimprove 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 thehubbub of the airport could be heard in the background. “It's greatto see this level of passion and commitment from the members. Oneof the great things was the CEO [Larry Kellner, who is alsochairman of Continental Airlines] of Continental came out tospeak.”

Continental FCU's board of directors voted 7-0 to reject amerger proposal from Wings Financial largely to “protect theinterests 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 itsmerger proposal without presenting it to their membership for avote. True to its word, Wings Financial said it will continue itscampaign launched March 9–the day it submitted its merger proposalto Continental–to encourage Continental's members to “ask for avote.” At press time, Wings Financial still had itscontinentalwings.com Web site and online petition up andrunning.

According to a Wings Financial spokesman, “the number ofpetitions Wings Financial has received to this point remains inline with expectations.” When asked if the CU had a time frame inmind for how long it plans to court Continental's members, thespokesman said “It would not be appropriate to comment on thetimetable 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,” Parishsaid in a March 21 press release.

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

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

Glatt said he did receive a call from someone identifyingthemselves as an attorney with a banking group, but no offer wasmade to him. Glatt would not identify the name of the bankinggroup. It was someone “representing some interest” Glatt said,adding he could not say more because he is a “little bitconstrained 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 CUswanting to convert to banks.

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

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

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

Glatt is the former president of CU consulting firm CounterIntelligence Associates and previously served as executive vicepresident/COO of $1.6 billion Teachers Credit Union before comingto Continental last August.

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

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

For one, during the week of March 19, Continental partnered withCredit Union 24 to offer members access to a 40,000 surcharge-freeATM network. The CU now belongs to Credit Union 24's and CO-OPFinancial Services' ATM networks. In mid-April, the CU will partnerwith XCU Capital, a CU-owned broker/dealer and in May, will add2,400 shared branches for member access through a partnership withFinancial Service Centers Cooperative, Inc., which has linked upwith 7-Eleven to implement additional shared branching services in4,000 locations.

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

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

Continental is also working on an arrangement with PSCUFinancial Services to equip the CU's ATMs with deposit-takingservices. Glatt said he received “nothing but praise” during hisrecent visit to Houston, but did hear some complaints aboutContinental's lending process and how decisions take too longbecause they're made out of state.

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

Glatt said the plethora of product and service rollouts were notknee-jerk reactions to Wings Financial's merger proposal, but hadbeen in the works for several months.

“We need to focus on lending and facilities. We say FOCUS–'forour credit union success.' We define success not in assets or ROAbut in member satisfaction.” The Wings Financial/Continental uproarhas an unusual twist. Bill Donovan, NAFCU's former senior vicepresident and general counsel is representing Wings Financialthrough Venable LLP, the widely-known Washington law firm. Whencontacted by Credit Union Times, Donovan said all press callsshould be directed to the credit union. He said he would follow upwith Wings Financial, which at one point was not responding torequests from Credit Union Times on several follow-up questions.Donovan, who joined Venable in 2005, had been with NAFCU since1979, building up the association's lobbying presence. He wasinstrumental in NAFCU's lobbying successes in the Credit UnionCampaign for Consumer Choice that culminated in the passage of the1998 Credit Union Membership Access Act. At press time, NCUAconfirmed that it had not received any further documentation fromWings Financial Federal Credit Union since Continental FederalCredit Union rejected its merger proposal on March 20.

The agency did not offer comment on the rejected proposal, butdid confirm that both credit unions have not sent any furtherdocumentation. NCUA Chairman JoAnn Johnson has previously said thatthe agency focuses on member benefit “first and foremost” whenconsidering any CU merger. NCUA's rules governing mergers offederally insured CUs require the approval of the boards ofdirectors of both credit unions and of NCUA before a merger canoccur, she added. The agency said it never received a merger planapproved by both CU boards, but did receive a “suggested” mergerplan from Wings Financial on March 9. –[email protected]