NAPERVILLE, Ill, and AUBURN, Mass. — 2007 looks to be one of the most active years ever for corporate credit union mergers. The latest deal pairs $11.9 billion Members United with $245 million Central Credit Union Fund. This makes four pending corporate credit union mergers. The other three are WesCorp/VolCorp, WesCorp/SunCorp and Southwest/Northwest. If all of these deals come to light, the corporate network will dwindle to 25. Massachusetts-based Central CU Fund is an interesting corporate. Founded in 1932, it is the oldest corporate, but one that has faced restrictions. Up until recently, it was not permitted to own shares in CUSOs and it could not engage in any mergers. Central CU Fund worked to pass legislation that took away these limitations. During that process, the corporate began to seriously evaluate its future. “Through that effort to change the statute our board spent more time thinking strategically, thinking about our long-term position. We didn't set out with the intent to merge. We knew we wanted to enter into partnerships, but that wouldn't give us the quantum leap we wanted,” said Jim Van Arsdale, CEO of Central CU Fund.

The board concluded that a merger would be the fastest and most efficient way to offer more to its members. After a lot of study and a list of five final corporates, it landed on Members United as the right partner. Members United has a presence in the very competitive Northeast region already, a geographic factor that Central CU Fund liked.

Central CU Fund is surrounded by larger competitors. For one, Massachusetts is the only state that has more than one corporate within its boundaries as EasCorp also calls the state home. Other contiguous competitors include Members United in New York, TriCorp in Maine and Constitution in Connecticut.

“Our larger members are being solicited by and are aware of other corporates. Margins are tight. My trust is members will react positively. Our product offerings will be expanded considerably, and a lot of things they like about Central Credit Union Fund will remain unchanged. We will still have an active presence in the state,” said Van Arsdale.

That active presence has been a hallmark of Members United's acquisitions. Its strategy has been to not only maintain the headquarters buildings in the states of the acquired corporates, but all front-line, client-focused staffers. It looks to gain economies of scale on the back end, but wants the face of the corporate to look the same to members.

Members United CEO Joe Herbst said that same philosophy will also be in place for this acquisition.

“We believe in the relationship model, in becoming part of the community in which we operate. We will keep all the member interfacing employees, Jim will stay on board and we will maintain the location,” said Herbst. “This is an area where we have done some business in the past. We want to become part of the Massachusetts credit union community. We are going after the 60-70% of funds invested outside the credit union community.”

As for going after that money outside the network, Members United is employing a different strategy than all other corporates. While most corporates have outsourced broker/dealer service to U.S. Central's ISI subsidiary, Members United is handling it on its own through its Balance Sheet Solutions subsidiary.

“We feel that is our best value to our members. If we felt outsourcing it to ISI would deliver a better value, we would. It's going really well,” said Herbst.

This deal makes Members United, which was born out of the merger of Empire and Mid-States, an even bigger player. “Everyone looks at asset size, but assets are really the function of the liquidity of your members. We are the largest corporate in the number of credit unions we service,” said Herbst. Members United serves more than 2,100 members and Central CU Fund will bring it 200 more.

It was an active week for Members United. The corporate also announced last week a merger on the check processing front, with the acquisition of the ICUL Service Corporation, a subsidiary of the Illinois CU League. See story on this page.

Interestingly, Members United has become a melting pot of sorts and a good example of the consolidation corporates have been experiencing. Members United is really the amalgamation of 11 corporates. Here is a look at past mergers:

oEmpire Corporate FCU merged with Rhode Island Corporate FCU in 1996;

oEmpire Corporate FCU merged with Garden State Corporate Central Credit Union in 1997;

oMid-States Corporate FCU merged with INDICORP FCU in 2000;

oEmpire Corporate FCU merged with CorpStar (South Dakota) FCU in 2002;

oMid-States Corporate FCU merged with Minnesota Corporate FCU in 2003;

oMid-States Corporate FCU and Empire Corporate FCU merged in 2006 (June 30) to form Members United Corporate FCU.

Similar to the recently announced merger between WesCorp and SunCorp, Herbst said a foundation will be set up in the name of Central CU Fund for Massachusetts. “Central Credit Union Fund is the oldest corporate in the country. We want to remember and recognize that. We want the credit unions of Massachusetts to run the foundation,” said Herbst.

Van Arsdale has been with Central CU Fund for three years and looks forward to the new era. Prior to this position, Van Arsdale was with BISYS, which just last week announced it was being acquired by Citibank for $1.45 billion. He also spent 1986 through 1996 with CUNA Brokerage Services and CNBS. –pgentile@cutimes.com

Instant Insights /

Members United and Central CU Fund Announce Merger; Four Corporate Mergers Pending

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