Corporates Pursue Different Strategies As Consolidation Shrinks Number Of Players
The continued consolidation of the corporate credit union system is driving corporates to pursue several strategies: delve deeper into niche markets, continue to expand, or develop more strategic partnerships.
"The world is changing," said Northwest Corporate CEO Kathy Garner. "Everybody's looking at what is their future, be it in niches, partnerships or expansion. It will be different for each corporate, and part of it will depend on where they are in the country."
In Tallahassee, Fla., Southeast Corporate CEO Bill Birdwell agreed, saying, "Some corporates will look for niches where they are especially skilled or where they have a strong presence geographically, and some are being very aggressive about going outside of their traditional fields of membership."
With the recent mergers between WesCorp in San Dimas, Calif., and Volunteer Corporate in Nashville, Tenn., in one case, and Empire Corporate in Albany, N.Y., and Mid-States Corporate in Warrenville, Ill., in another, analysts expect to see some of the smaller corporates concentrate on their niches.
"There are some corporates that have become niche players in a particular set of products or services that they really excel at," offered Todd Lane, WesCorp EVP and CFO. "And they have been very successful. I think we will see that continue. It's a good strategy, and it's not necessarily bound by geographic constraints. There are some that have a very strong presence and offer excellent service in their state or region, and that has become their niche."
With its presence in multiple regions throughout the country and its wide array of products and services, some have suggested WesCorp is the opposite of a "niche player" as it continues to expand, but Lane said the mammoth corporate hasn't set its sights on extending its reach.
"WesCorp does not have an expansion strategy. Most of our expansion has been somewhat organic," he suggested. "We have attracted credit unions from across the county, in many cases because we offer products that are not offered by other corporates."
Still, such expansion-be it organic or through mergers-is felt throughout the corporate marketplace. "We have some plans. We have some good products and services, and we will stick with what we are doing well," Birdwell offered. "We will act rather than react to what's going on around us. We will do what we have to in order to serve our credit unions. That's the bottom line.
"Empire and Mid-States and VolCorp and WesCorp, both of those [merger announcements] surprised me," he continued. "I was surprised and disappointed with the way the VolCorp merger was done in such secrecy and that if they felt they had to merge, they didn't at least consider Southeast. It would have made more sense geographically and culturally. I didn't expect those, so I guess I'm not a good soothsayer. But I do expect consolidation to continue."
But such consolidation doesn't have to mean mergers.
"We keep looking at all of these options and asking what is our core, can we continue to be all things to all people? Maybe sometimes we can, but the key is to stay relevant," Garner suggested. "I see us continuing to form partnerships with other corporates. We're particularly interested in talking to other corporates about what they're doing on Check 21. We don't want to reinvent the wheel. What I don't want to see is for everyone to create all this infrastructure separately instead of working together. Of course, the problem with sharing is that it also means sharing control, and that can be challenging. We have been doing our item processing with FirstCorp for about two years now, and it works well, but it does mean we can't turn on a dime."
Such partnerships demonstrate corporates can and do leverage the cooperative spirit of the credit union movement. "I think corporates are cooperating now as much or more than ever," Lane commented. "Our trade group, the Association of Corporate Credit Unions, is one sign of that cooperation. The fact that we are all members of U.S. Central is another sign of that cooperation."
Lane maintained that it is no harder for corporates to cooperate than for their natural-person counterparts, but Garner and Byrdwell suggested that's not always the case.
Cooperation Vs. Competition
"I think maybe in some cases it is tougher for corporates to cooperate," Garner said. "We are pretty competitive. And competition is good, but it can make it tough to cooperate some times. [Natural-person] credit unions can get together outside of their regions to cooperate. I think corporates have more overlaps."
Birdwell agreed, adding, "It's probably a little bit harder because corporates have a nationwide field of membership while natural-person credit unions, for the most part, are more localized. Now there are some exceptions, and some areas where there is a lot of competition among natural-person credit unions, like San Diego and Tampa. But not all natural-person credit unions are in competition with each other, the way all corporates essentially are."