With Membership Eroding, Two Local Clearing Houses Opt to Merge

Facing shrinking membership rolls as the banking industry consolidates, two Middle Atlantic automated clearing house associations have agreed to merge.

Officials with the Virginias Automated Clearing House Association and the North Carolina Automated Clearing House Association said they expect little opposition to the merger, which is slated for early 1996.

The announcement comes at a time when bank mergers are affecting the 38 local and regional associations nationally. There is concern that more banks may follow First Interstate Bancorp, which announced in August that it will quit five western clearing house groups to reduce expenses.

The local associations, which collectively form the National Automated Clearing House Association, help banks and corporations with educational and marketing initiatives.

"Both boards share a belief that this proposed merger presents a win-win situation, with many benefits to be gained," said Sandra T. Craighead, vice president with Crestar Bank, Richmond, Va., and president of the clearing house for Virginia and West Virginia.

The national automated clearing house is a computer-based network for the clearing and settlement of electronic funds transfers between banks. It is used for corporate trade payments, government funds transfers, and consumer payment programs such as direct deposit. It transmitted approximately three billion payments worth more than $10 trillion last year.

The merger of the two state associations is also a response to the growing competition from other local and regional clearing house groups, which increasingly are moving outside their regions to court new members.

Banks are "being bombarded today" by offers to join other groups, said Ralph E. Reardon, senior vice president at Coastal Federal Credit Union, Raleigh, N.C., and chairman of the state's clearing house.

"It's wide open, and everybody's territory is everybody else's."

The merger of the two associations will lead to cost savings "and maybe even a reduced fee structure" for members, he said.

Norman Robinson, executive director with the Virginia clearing house, said the goal is to become "more regional" in scope. This is particularly important considering that the groups' largest members, such as NationsBank Corp. and First Union Corp., are expected to question the benefits of being "a member in nine different ACH associations."

Gary B. Nesbitt, executive director of the North Carolina group, said the decision to merge represented a good "fit" between two geographically and philosophically similar groups.

Mr. Nesbitt said the name for the combined entity has not been selected, nor has the new executive director, adding that those decisions will soon be settled.

He said the two groups have worked together before, sponsoring several cash management conferences to promote more corporate membership and address payment systems risk.

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