PSCU & Co-op Plan to Be 'Stronger Together' With Merger

Chief executives of the nation’s two largest payment CUSOs said their planned year-end merger will create not only a larger organization, but one better able to meet growing technology and service demands.

PSCU of St. Petersburg, Fla., which has 3,400 employees, plans to merge with the 1,940-employee Co-op Solutions based in Rancho Cucamonga, Calif., 40 miles east of Los Angeles. PSCU President/CEO Chuck Fagan will remain CEO after the merger.

While St. Petersburg will be the headquarters, no other decisions have been made about other facilities. Specifically, Fagan said during an online discussion Monday that no decision has been made whether to keep a West Coast office.

“There’s an entire work stream in that integration management office around facilities and no decisions have been made on what facilities survive, what are added, what maintains. So we’ll wait and see as the deal gets closer to actual close as to what the facility situation looks like,” Fagan said.

PSCU Chair Frank Weidner, who is president/CEO of Wings Financial Credit Union of the Minneapolis-Saint Paul area ($9.4 billion in assets, 371,557 members), said PSCU and Co-Op Solutions will be “stronger together.”

“The decision to combine with Co-op comes at a time when the payments landscape continues to see rapid evolution, with innovation and technology reshaping the needs of our industry and financial institutions,” Weidner said.

Some of those changes include:

• Consumers bypassing their banks and credit unions to make instant payments through services such as PayPal and Venmo.
• The Federal Reserve’s introduction this year of its FedNow service, which will extend instant payment capability to banks and credit unions.
• Legislation that could diminish interchange income, while security threats have been rising.

PSCU has been paying smaller dividends as a percent of assets for the past several years, while ramping up investments. PSCU’s capital spending rose 13% to $61.7 million in its year that ended Sept. 30, 2022, as revenue rose 16% to $753.6 million.

Fagan said the organizations “collectively” invested about $75 million in the year that ended Sept. 30 this year. Fagan said the pace of rising investments needs to continue because of “how fast things are moving.”

Co-op generally serves smaller credit unions. It generated $527 million serving 2,650 credit unions in 2022, while PSCU generated $871 million serving more than 2,400 credit unions in its fiscal year that ended Sept. 30.

Merger plans began early this year and concluded Saturday evening, Fagan said. The deal needs to be approved by both boards before the merger can close Dec. 31.

“It is a fast process,” Fagan said.

Todd Clark resigned from Co-op in September after seven years as its CEO. He was replaced by Dean Michaels, who had joined Co-op in 2017 and was its chief strategy officer for the past five years.

Michaels, who also participated in the online discussion, said the possibility of a merger had been discussed with the board for years as one of the “big leap” moves that Co-op Solutions could take.

Michaels said unique assets brought to the merger by Co-op include its ATM network and shared branching. PSCU’s unique assets include digital banking, digital lending and “everything around money movements.”

PSCU has a wider footprint on the East Coast, while Co-op has a larger presence on the West Coast. Many credit unions belong to both organizations. “Combining the organizations creates a much stronger nationwide footprint,” Michaels said.

The PSCU board will grow from its current 11 seats to 13 seats after the deal closes with nine seats held by PSCU member credit unions and four held by Co-op members.

“In a merger like this, there’s not cash changing hands. PSCU is larger from a revenue perspective and where you start to see some of that show up is in things like the distribution of board of directors,” Michaels said.

Fagan said each CUSO has developed some technologies, and bought some technologies off the shelf. The integration team will have to “hand pick what’s best in terms of servicing members.”

“We’re both in that credit and debit space. I think there will definitely be some duplication there,” Fagan said. “And I expect that we’ll be able to involve credit union team members as well to provide some impact on what’s best.”

Because of the advance planning needed to change meetings, the 2024 meetings for each organization will continue as planned: Co-op THINK 24 in Nashville from May 7-10, 2024 and PSCU’s Member Forum in San Antonio, Texas, April 10-12.