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“Their philosophy and ours were very similar,” LSI CEO Kurt Thelen said of the merger. “And with the size that we were both at, we were not able to afford to do some of those things we wanted to do.
“In particular, the data processor we both wanted to use was too expensive as a single unit. But we could afford it very well if we were both together. That, as an example, saved us $600,000 right out of the chute.”
LSI is building its fourth branch at Celebration Village on East Beltline and Knapp Street.
Thelen said LSI and Capital Community quickly recognized the advantages of having a sister credit union in a non-competing region.
For every position from management on down, he said, there is someone with an equivalent position and capability in the other region providing immediate back-up.
Also, whereas West Michigan has been a strong loan producer, he noted that central Michigan has been an excellent deposit producer.
“It gives us that balance,” Thelen said. “And if the economy goes down in the state, it generally doesn’t go down across the entire state. So with our new diversity we don’t have to force things in either region, because we just pick it up in the other.”
Thelen has been using that argument in an attempt to woo credit unions on the eastern side of the state, as LSI and Capital Community have forged plans to create a network that stretches across the state.
“Why wouldn’t you want to be part of something that goes across the entire state?” Thelen asked. “If there needs to be growth in one area, we can be a part of that. We can help the city grow without putting pressures on the system.”
Thelen knows first-hand the difficulties of a small credit union trying to exist in the midst of a weakened regional economy.
Though LSI has a 52-year history, it received its charter as a community credit union only 18 months ago.
Since then Thelen has watched LSI’s assets grow from $86.6 million to a current $213 million, and he has learned to enjoy life on the higher side of the scale.
“It used to be if one of our companies had lay-offs or went out of business, as a small credit union we weren’t able to jump right in and give (loan) extensions and help out,” he explained.
“I’ve seen the power and advantages you have when you don’t have to worry about one particular group. You can come to their aid — and that’s really what you’re there for as a credit union.
“Anyone can take care of a group when you’re doing well,” he added. “It’s something different when you can step in and help out when things are bad.”
LSI learned this the hard way in the recent economic slump when Steelcase and West Michigan’s major manufacturers began lay-offs. Meanwhile, Thelen said, Capital Community absorbed the same lesson after a round of lay-offs by state and local governments and General Motors.
“There was then this pressure to say, ‘What if we had the diversity of a larger group to help pick up the slack,’” Thelen said.
LSI and Capital Community timed the merger to coincide with the June 1 deployment of the Credit Union Modernization Act. Part of the new law allows two joining entities to function as one surviving entity, but retain the identity of the original entities. As such, the 52-year-old LSI and the 70-year-old Capital Community are able to retain the names that their members has grown accustomed to.
Although at some point there will be a universal name, Thelen said the two companies and any credit union that partners with them in the future will not change names until a statewide network is established.
At that point, all partnering credit unions will be able to have a say in the new name. He believes that knowing that any identity change is years away is a further inducement for other partners to join.
He said each partnering credit union will retain a regional focus, with separate management and separate boards. But a member of either thrift can make transactions at any of the eight locations in either region across the nine-county service area.
Thelen said the merger is just one step in LSI’s plan as a community credit union.
Until recently, LSI was a defined credit union serving over 500 employee groups and companies in the Kent County area. Capital Community performed its own transition in 2002, from a membership of almost entirely government employees to an open community base.
Another step is LSI’s newest branch in Celebration Village.
“One of the things we switched away from was to look for more of a community location,” Thelen said. “We looked at where our locations were at and that was an area we were totally not serving.”
After a feasibility study, LSI realized that not only was it not servicing the northeast quadrant of Grand Rapids, the increasingly dense East Beltline/Knapp area lacked any credit union presence at all. There were three banks, but no credit unions.
“What a perfect location for us to come in and teach people about credit unions and teach them the value of credit unions,” Thelen said.
“We’re very excited. Most of our locations have been where people work, and this is more of a location where people will handle both their deposit and loan relationships. This is a location where people live.”
LSI also hopes to gain exposure by means of the heavy traffic of the East Beltline corridor to Rockford and the retail traffic of the Celebration Village and Knapps Corner.