ONTARIO, Calif. -
CO-OP, which had once considered "deemphasizing shared branching," and CUSC have signed a letter of intent to combine their shared branching operations, creating the largest shared branching network in the country.
Under the agreement, CO-OP will purchase a 51% share of CUSC, which will continue managing and marketing the network. The move follows CO-OP's acquisition of shared branching pioneer Service Centers Corp., three years ago and the more recent purchase of the shared branching and ATM network ENCORE in the metropolitan Washington area.
That leaves Financial Service Centers Cooperative as the only solo shared branching system and Credit Union 24 as the only shared ATM network outside of CO-OP.
CO-OP Financial Services CEO Stan Hollen and CUSC CEO Carroll Beach lauded the continued consolidation in the shared branching sector and the move towards a single CU switch.
"This has been very well received by the credit union community. We are beginning to see aggregations towards a stronger credit union movement," Hollen told the Credit Union Journal.
Beach said the hope is to consummate the deal in the next 90 to 180 days, pending a vote of CUSC's credit union owners, tentatively slated for March 30.
While such consolidation diminishes the number of choices a credit union has when shopping for a share branching vendor, Hollen and Beach were quick to point out that consolidation in the credit union marketplace doesn't mean higher prices, the way it might in other industries.
"This means there is the opportunity to reduce expenses," Hollen suggested. "Since the acquisition of SCC we have made real strides to enhance the financial situation there, and this brings the additional opportunity for CUSC to further improve on those efficiencies."
Plus, the CU philosophy is alive and well at these CUSOs, Beach noted. "When your clients are your owners, and those owners are credit unions, there's just a different philosophy that both CUSC and CO-OP share. The motivation is quite different," he explained.
Beyond the ability to reduce expenses and improve efficiencies, Hollen and Beach said there is still plenty of room to grow in the shared branching market, noting there are still a number of credit unions that are not participating in any of the shared branch networks.
"Early on, there was some concern about ending up serving the competition, but I think that concern has really subsided," Beach related.
"The major banks are still building branches, and with a few exceptions, credit unions by and large lack the resources to build that kind of branch network. Shared branching really gives credit unions the ability to compete."
WHAT THIS MEANS
* CO-OP Financial Services will own a 51% stake in CU Services Corp.
* CUSC will retain its name and will gain additional outlets from CO-OP's shared branching unit (formerly SCC).
* The combined network will have 1,452 outlets and 87 stand-alone centers spread across 40 states.
* The combined network will represent 80% of the shared branches in the U.S. with more than 1,000 CUs participating.
* The 21 SCC stand-alone centers that recently converted to the E-Funds platform will not have to convert to CUSC's "Next Generation" platform right away.
