CO-OP Continues To Grow As It Merges With ENCORE

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In a move to expand its East Coast presence, The CO-OP Network agreed last week to acquire credit union-owned ENCORE, an electronic funds network for credit unions in the Washington, D.C., area.

The deal is the seventh for the CO-OP as it moves to cement its place as the national electronic switch for credit unions, but the first major one since 2002's merger with Service Centers Corp. On-and-off negotiations between the CO-OP and Credit Union 24, the only other remaining major credit union EFT have yet to bear fruit, leaving the two systems to continue to compete in several markets.

But the deal also muddies further the markets for shared branching, the unique credit union service that has emerged as a critical disaster backstop, such as after Hurricane Katrina. That's because the merger will combine ENCORE's shared branching network with CO-OP's, which consists of the shared branches it acquired in the Service Centers deal. That was after the CO-OP had shed its own shared branch network with the divestiture of Financial Services Centers Cooperative. Now those two networks compete.

ENCORE, based in the Washington suburb of Falls Church, Va., is owned by 124 area credit unions, including Apple FCU (Virginia), Navy FCU (Virginia), Pentagon FCU (Virginia), Congressional FCU (Washington), Fort Belvoir FCU (Virginia), White House FCU, and State Employees CU of Maryland.

ENCORE has about 320 ATMs, most of them already available over the CO-OP, and a dozen shared branches it will add to the CO-OP Network, which already claims 1,850 CUs and 25,000 branded ATMs across the country.

Terms of the deal call for each of the credit union owners of ENCORE to receive shares in CO-OP in exchange for their ENCORE stock.

Tom Reed, president and CEO of ENCORE, said his smaller company agreed to the merger because they believe they can get better pricing through the much larger CO-OP. The addition of ENCORE's 10 million transactions a month should benefit CO-OP by helping reduce its transaction costs, he said. It brings down the CO-OP's rates because of the larger volume. "We aligned with CO-OP Network today because we wanted to increase our organizational and financial strength," he said.

"Our partnership with ENCORE is one of our largest to date in terms of transaction volume, with ENCORE processing almost 10 million transactions per month," says Stan Hollen, CEO of CO-OP Network.

Both organizations have their transactions processed by eFunds Corp., making integration easy, said Reed.

ENCORE will operate as a division of CO-OP Network. Initial focus will be on continuity of service for both EFT and shared branch processing to current member credit unions. Additionally, the ENCORE division will provide leadership on merchant and card services.

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