SAN DIMAS, Calif. – Will there be two or three shared branching networks available to U.S. credit unions at this time next year? Currently there are three: Service Center Corporation, headquartered in Southfield, Michigan; Credit Union Service Corporation, headquartered in Duluth, Georgia; and the Financial Service Center Cooperatives, headquartered in San Dimas, California. But last week Service Center Corporation, which is wholly owned by the Ontario, California based CO-OP Network, and Financial Service Centers announced they have agreed to "form a strategic partnership" to cooperate on certain shared technologies and business practices, leading many to wonder whether a merger between the two shared branching organizations might be in the offing. "Over the past five years, credit union shared branching has seen explosive growth in the United States," said FSCC CEO Sarah Canepa Bang. "With branches throughout the U.S. and in six other countries in our network, our coverage is significant enough to be meaningful as a channel. At the same time, there's also been tremendous growth in bank branches, and the credit union movement needs more shared branches to be competitive. By partnering with SCC, we aggressively address this issue while also providing more value to our credit unions and the credit union movement as a whole." Participating credit unions currently have access to 1,620 shared branching facilities in the United States and internationally in Germany, Guam, South Korea, Italy, Puerto Rico and Japan. This is nearly triple the number of branches available just five years ago. "SCC and FSCC complement each other nicely," said SCC President Ken Sucher. "Both companies bring unique strengths to the marketplace as well as deep technical knowledge. We know this alliance will ensure the ongoing development and expansion of shared branching." But executives with both FSCC and the CO-OP Network remained unprepared to talk merger. "There will be a natural tendency to speak about this in terms of merger, but none of us has really begun to do that," said Jim Hanisch, executive vice president with the CO-OP Network. "We are focusing on the more obvious areas of cooperation that are just no-brainers," he added. Those areas include technological cooperation and eliminating redundancies, he explained. Bang agreed and said that the goal is to move forward into the areas where there can be obvious cooperation and money saving. She added that both organizations plan to have their cooperation formalized by June 1 of 2005. "I expect the reaction we will get from our members will be to ask why we haven't done this before," said Bang, admitting that some move to cooperation, or even merger, has been obvious in the industry for some time. "But you know, I think that both boards of directors just had to get to this place at their own speed," she added. There really wasn't any single precipitating event that brought this about now." Bang echoed Hanisch' observations about the ability to end redundancies in areas such as telecom, training and other technologies as being a key benefit to both networks. Just being able to have only one telecom contract and not two, Bang said by way of example, will be a help. Craig Beach, vice president of marketing for the Credit Union Service Corporation noted that the increased cooperation made a lot of sense for both organizations since, from his point of view, the increased cooperation would allow his two competitors to gain some of the same sorts of efficiencies that CUSC had already. CUSC differs from the other two shared branching organizations in that it serves as a network of networks, Beach explained, since CUSC works most often with shared branching networks that the state leagues operate. No credit unions would speak on the record about the agreement since it had just been announced at press time. -

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