PONTIAC, Mich. -
The $37-million Municipal & Health Services CU, the $34-million Wy-South FCU and the $28-million Crestwood Community FCU have to the National Credit Union Administration (NCUA) and the Michigan Office of Financial and Insurance Services (OFIS) for permission to combine all three CUs subject to their memberships' approval.
The arrangement would work this way. The credit unions will merge into one entity, but each will remain an independent operation with its own brand, adding the tagline, "A part of Affinity Group CU." Affinity Group CU will have a 13-seat board allocated based on the net worth of each CU partner. Rather than the standard hierarchal structure, Affinity will have Strategic Direction Teams made up of board members, partnered CU officials and executive team members of CEOs from each credit union. Special Matter Experts (SMEs) and other trusted industry advisors would participate as needed. Each partner CU president has a leadership role on the Executive Team and will participate in one or more of the Strategic Direction Teams (see accompanying chart).
To wring out costs, some back-office operations will be consolidated with each CU choosing which services to offer, including selecting from CUSO offerings. In addition, by year-end 2008, all will move to a common DP platform from CU*Answers, which has agreed to waive fees for the first year.
Tom Miller, CEO of Affinity Group CU said, "Once we came up with the Affinity plan, the rest fell into place. Each of our credit unions could do just fine and go along for another 10-years. We are all healthy, full-service credit unions with double-digit net worth. But we wouldn't be doing all we could for our members, so this makes good sense. Why wait any longer? In doing this, we triple our capital and double our branches (to six) with four locations."
Affinity Group CU Chairman Mike Campbell said the arrangement came about because all three CUs wanted to "remain relevant for our members in the future." Being perceived as irrelevant due to limited and product and service offerings has been a driver in the dwindling number of CUs nationally, especially among smaller credit unions. "The choices for CEOs and boards is two-fold. Try and go it alone and keep up with complex compliance, rising costs, shrinking margins, new technology and increased competition, or find a better business model," Campbell said.
To bridge the logistical challenges between offices for board and management, Affinity will use the Internet, said Jenise James, IT Manager for Affinity Group CU, with state-of-the-art high definition video communications technology from LifeSize (www.lifesize.com). "We'll create regional video conferencing centers at several CU branch locations so that travel time for meetings and training can be reduced to 30 minutes," the credit union said.
Affinity, a word whose definition includes an "inherent likeness or agreement" and "close resemblance or connection," is not lost on the principals involved in this agreement. Rather, it is the basis from which they build this new model, said Carma Peters, CEO of Wy-South FCU. "This is not about the end of one organization for the sake of the others. It's about building a larger network and becoming more than just a simple stand-alone option for our membership. It's about joining with other CU partners to deliver the kind of services members are looking for. Times have changed; today, product availability, convenience and price trump member loyalty. If we are unable or unwilling to meet our member demands, they will vote with their feet and go elsewhere."
"The narrowing of interest margins and the complexity and burden of new regulations means smaller credit unions will quickly run out of resources," said Miller. "That's a huge liability for a small CU. I wouldn't want to be a director facing those liabilities. We need something more and members are demanding more. If it means those directors must face losing what they perceive as 'control,' then so be it. When I talk to them, I ask, 'control of what?' There is usually a pregnant pause."
Still, facing up to those issues of individual credit union identity, history, legacy and pride of membership has to happen, he allowed, but the networked model Affinity has created has dealt with all that. "We started by saying we would protect and cherish every credit union's identity. We've taken a DBA (doing business as) approach, with each credit union keeping its own name while adding the tag line, 'a part of Affinity Group CU' to the signage and branding. This is made possible by a provision in the Michigan CU ACT permitting CUs to merge into one charter, yet do business using a unique name at each office location. The regulatory agency deserves kudos for that," said Miller.
"Partnering is a learned skill," added Campbell. "Our board of directors has spent a great deal of time planning on how to partner with other boards. Nonetheless, we expect to learn every day."
"We're setting a new precedent for governing the new organization," said Bob O'Keefe, Crestwood FCU chairman. "The board is prepared to accept changes as new CU partners join. Our primary role will be to review and act on plans and recommendations developed by our six strategic direction teams. We are looking forward to passing the value gained along to our members in the form of new products, services and branches for their convenience."
"For most members, the delivery of financial services is a local and personal choice," said Crestwood CEO, AnnMarie Miller. "This is why it is so important for Affinity Group partners to maintain their unique branding, office locations and staff. Our presence with members is so much stronger when we are able to build on the legacy of good will and trust already earned by each CU's current staff."
Affinity Group will also leverage its ownership in four Michigan CUSOs, CU*Answers, Mortgage Center LLC, XTend LLC and CU Partners Solutions, with each bringing something of value to the table, said Miller. Right now, all partner CUs operate on different platforms, but the transition, eventually, to CU*Answers will be gradual enough that it "won't be a monkey wrench," he said.
"There is enough geography between us that we won't have to service each other's members from day one, so there is time for us to build, then convert all systems by year-end 2007."
