By Ray Birch
WASHINGTON—It may have been a long time since a credit union attempted to become a bank, but a traditional feature of credit unions remains true, reminded Ryan Donovan—the fate of the deal doesn’t rest in the hands of the CU’s executives or board.
As CUToday.info reported, the $824-million Thrivent Credit Union has proposed a merger with the to-be-formed Thrivent Bank, which would be an affiliate of Minneapolis, Minn.-based financial services firm Thrivent Financial for Lutherans.
CUToday.info contacted both national credit union trade associations for their views on the potential for the conversion to a bank charter. CUNA’s Donovan shared his insights; NAFCU declined to comment.
The plans call for the Appleton, Wis.-based Thrivent Credit Union to be merged into a yet-to-be chartered Thrivent Bank, for which Thrivent Financial for Lutherans is seeking an industrial bank charter in Utah. Should the merger take place it would mark the first time a large credit union would have been acquired by a bank in almost 15 years.
‘Not Unprecedented’
“This is the first time in a long time that we've seen something like this happen,” said Donovan, CUNA’s chief advocacy officer. “However, it's not unprecedented for a credit union to sell to a bank. This decision is in the hands of credit union members, and I think certainly based on our surveys of consumers, consumers rightfully believe they're in better hands with a credit union.”
The last time a bank acquired a large credit union was in 2006, when Columbus, Ohio-based Nationwide Federal Credit Union, with more than $580 million in assets at the time, merged into Nationwide Bank. In 2020, First Bank of Berne in Indiana acquired $18-million Adams County Farm Bureau Credit Union, but in that case rules related to federal charters were not applicable, as the state-chartered CU also carried private deposit insurance. But the process still required the then $18.8-million CU to first convert from a state-chartered credit union into a state-chartered mutual savings bank. Then, immediately upon approval of the conversion, the Indiana Department of Financial Institutions signed off on the acquisition by the bank.
Simpler Process
Compared to other deals, the process may be simpler for Thrivent CU, in that Thrivent would not first have to convert to a mutual savings bank charter before then becoming a commercial bank, as has been the case in some other conversions.
Ryan Donovan
In the Nationwide FCU deal, its 44,000 members were offered $79 million for their the $65 million in retained earnings in the credit union, a 17% premium. Payments were made on a pro-rata basis to members.
In addition, Nationwide Credit Union also convened a special committee of board members who were no longer employed by Nationwide, who eventually recommended the merger. As CUToday.info recently reminded, objectives of mergers in the past, including banks buying credit unions, have not always been backed by good intentions for members, and instead focused on compensation packages for CU executives.
New Rules, New Visibility
But Donovan said that same situation will not occur under NCUA’s new merger rules.
“There is more visibility into the merger process today,” said Donovan. “And I have confidence NCUA is going to follow its own rules, especially given the unusual nature of this (Thrivent) deal and the potential that there could be an incredible disservice to credit union members if rules are not followed. I would expect NCAA would also be mindful there's going to be a lot of eyes on this process, making sure Thrivent Credit Union fulfills its responsibilities.”
Donovan said he also has confidence in Thrivent CU’s membership.
“We have seen a number of these deals attempted throughout the years, and few are successful, mainly because members of the credit unions recognize the value of credit union membership,” he said.
Trendsetter? Unlikely
If Thrivent eventually merges into the bank, Donovan it will not spark a trend of more CUs selling to banks.
“There are a lot of steps for a credit union to go through in this type of move,” said Donovan. “There are a lot of regulatory steps to be taken, and a member vote…So, the final chapter is far from written on this transaction, much less on something that has happened once in the last 10 to 15 years.”
Donovan pointed, too, to the existing relationship between Thrivent CU and Thrivent Financial as a driver for the merger.
“In this case you've got a bank and a credit union, which are focused on kind of the same sort of consumer segment, coming together,” said Donovan, who added that banks’ actions over the years indicate somewhat of a “disinterest in the consumer base that credit unions very successfully serve.”
Other Deals Down the Road
However, Richard Garabedian, counsel with Washington-based Hunton Andrews Kurth LLP, previously told CUToday.info there are banks now interested in buying a credit union, saying those discussions are in their “infancy.”