Empire Corp., Mid-States Plan Merger
Mid-States Corporate FCU and Empire Corporate FCU are exploring a potential merger that would create an $8.5-billion entity serving some 25% of the nation's natural-person credit unions.
"Scale is getting to be very important for natural-person credit unions as well as corporates," noted Mid-States Corporate FCU's Mike Lee. "As you grow, you are able to deliver the best products and services at the best prices, but you don't accomplish that growth over night. But the thinking was, if you could find a like-minded organization, together you could really take a jump on this and you really could accomplish it almost overnight."
The boards of the two corporates have signed a letter of intent and are now in the process of performing the necessary due diligence. The hope, Lee said, is that the boards will be ready to sign an actual merger agreement some time in January.
"We are very excited by the opportunities this merger will bring," said Empire Corporate CEO Joe Herbst in a statement. "Besides the economies of scale a merger of this size would entail, the largest opportunity lies in harnessing the combined talents of the people in both organizations to create a new corporate credit union that can serve its members exceedingly well in the 21st century."
Mid-States CEO Dave Preter agreed, adding, "It is our intention to bring the skills and resources of both Mid-States and Empire to bear in creating a world-class corporate credit union. The combined corporate will have the size and capabilities to assist credit unions throughout the country with their liquidity and back office needs as a trusted partner within the credit union industry."
The goal, they said in their joint statement, is to create a third "top-tier" corporate, joining the ranks of-and competing with-Western Corporate and Southwest Corporate.
Empire and Mid-States have been in discussions for several months, and the boards have met a couple of times, according to Empire's Victor Vrigian, noting that a key factor in the proposed merger is the long-standing relationship between the CEOs of the two corporates.
"They've known each other for years, I think about 15," Lee agreed. "And they have found through the years that when you're looking for a business partner, you need to find someone whose philosophy aligns with yours."
While mergers commonly occur between entities that are contiguous geographically, this is a rare case of a merger in which the two would-be partners are separated by several states-at least on paper.
"This is not just a question of geography," offered Vrigian. "What is more important are the synergies created by this."
Plus, that geographical separation really only exists "on paper," Lee suggested. "We have very little overlap. What you often see in a merger is two groups that are already serving some of the same players, that is not the case here," he observed. "But that separation isn't as wide a gulf as you might think. We call on Ohio. They call on Pennsylvania. In many ways, we are already connected."
Because the two corporates are approaching this as a merger of equals, it is still unclear which charter will be the surviving charter or what the new entity's name might be. "We probably won't keep either name," Lee offered. "This is going to be a brand new day."
But, Vrigian added, it is way too early in the process to make any guesses on either of those fronts, as there is still the due diligence process to go through and many other issues to explore.
Should the two boards formally agree to merge, the next step will be to submit the merger proposal to NCUA. While the members of the surviving charter will not need to vote on the merger, the members of the charter that will be disbanded will require a vote.
The $4.5-billion, 1,100-member Mid-States is headquartered in Warrenville, Ill., and has branches in Indianapolis and Eagan, Minn. Albany, N.Y.-based Empire has $2.9-billion in assets and more than 1,000 members and has branches in Jamesburg, N.J., Sioux Falls, S.D. and Warwick, R.I.