TALLAHASSEE, Fla., and ALBANY, N.Y. – The League of Southeastern Credit Unions & Affiliates (LSCU) and the New York Credit Union Association (NYCUA) on Tuesday said they have signed a letter of intent to combine many of their operations into a jointly owned subsidiary that will house all of their back office functions.
The leagues also will collaborate on core services that are not state-specific and can be shared. They said the goal of this shared services model is to enhance core services and expertise, reduce costs, become more efficient and expand solutions for credit unions.
Under the new collaborative structure, the individual leagues, CEOs, and their boards will be maintained, focusing heavily on advocacy and other core functions specific to their individual states. The majority of other functions will be shared between the two leagues, along with associated costs and any new revenue generated.
The new business model will be implemented in phases over the next three years.
On a media briefing Tuesday afternoon, the two league presidents said the deal is a recognition of the consolidation of the credit union movement, which in turn has caused revenue compression at league service corporations. They said phase one of the collaboration will be to combine back office functions, while phase two will be to develop a for-profit entity that will develop new products and services.
Bill Mellin, president and CEO of the NYCUA, said he expects the combination to save the two leagues “millions of dollars” over the first three years.
“We are particularly excited about a collaboration with LSCU,” said Mellin. “I have known Patrick [La Pine] for a long time. He has a great team and I know our team is going to work well with them. We are similar in size and scope. The distance is interesting, but we all know half of Florida is New Yorkers anyway,” he joked.
“Every year there are less credit unions,” Mellin continued. “We don’t think mergers are going to stop – they will continue or perhaps accelerate over time. This has had an impact on leagues. This partnership will allow us to move forward as an independent organization. Our product and service levels will increase and enhance over time.”
Patrick La Pine, president and CEO of the LSCU, noted his league is the result of a consolidation of the Florida and Alabama six years ago, which he said has been “very successful.”
“The opportunity to partner with another large, successful league was something we could not pass up,” said La Pine, who acknowledged many would not look at Alabama/Florida and New York as a natural combination due to the distance between the states.
“Why Florida, Alabama and New York? It really started well over a year ago,” La Pine recalled. “The two leagues were in discussions to merge our card programs. Throughout that process, we realized we had a lot in common. Our staffs worked very well together. We decided to look at some opportunities.”
La Pine said he and Mellin sat down at CUNA GAC in February and talked about closer collaboration. Later, meetings were held in New York to discuss a concept. The two leagues hired Kirk Kordeleski, president/CEO of Kordeleski Consulting, who worked with the two leagues on developing a business model.
Both league boards discussed the idea of a collaboration at their September board planning retreats, La Pine reported.
“Credit unions want their league service corporations to be more efficient, to collaborate more,” he said. “This collaboration allows us to double down on advocacy because our advocacy teams will be able to focus more. We think it is going to resonate very well with credit unions.”
Model For Future?
Both Mellin and La Pine said they hope other state CU leagues will look at this partnership as an “alternative structure” to be followed.
“We think other leagues will look at this partnership and see opportunities – possibly three-way, five-way, even 10-way partnerships,” offered Mellin.
Said La Pine: “We want to create an alternative model for leagues that otherwise might think they have to merge with another league. Leagues will be able to maintain their independence, and keep their own boards, but they will be able to back out certain functions into this shared services model – at a lower cost than they could do for themselves.”
‘Different From Anything Out There’
According to La Pine, what makes this collaboration “different from anything out there,” including Plexcity, a back-office services entity formed by the cross-country combination of the California and Nevada CU Leagues, the Maryland and District of Columbia CU Association, and the New Jersey CU League, is most shared services corporations focus on back office functions.
“In addition to those, we are looking at anything else that does not have to be state specific, including education and marketing,” La Pine explained. “We very much want to keep our advocacy functions housed locally, because all politics is local, but we can take all the other functions and put them into this new entity. The for-profit entity will allow us to develop new products and services.”
The two league presidents said they had no concerns about the distance involved. Mellin went so far as to say “geography and location do not matter these days.” He said the company will be incorporated in Alabama because there is a “more friendly environment there.”
Added La Pine: “One thing we learned from our consolidation is people do not need to all be in the same building.”
The League of Southeastern Credit Unions & Affiliates represents 270 credit unions in Alabama and Florida with a combined total of $71 billion in assets and more than 7.1 million members.
The New York CU Association serves as the trade association for the state’s credit unions, which collectively hold more than $71 billion in assets and serve more than 5 million members.
The new subsidiary organization will serve over 650 credit unions, a total of $142 billion in assets and 12 million credit union members.
