Editor's Note: This story has been updated since it was originally reported to provide greater clarification around the nature of the merger.
By Ray Birch
APPLETON, Wis.— The $824-million Thrivent Credit Union is considering 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 has learned plans call for Thrivent Credit Union to be merged with and 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.
Regulatory Approval Being Sought
Whether Thrivent’s deal happens or not will be determined first by NCUA. In a statement on its website, Thrivent CU said it is seeking approval from NCUA to proceed with a vote of its members. Thrivent’s statement did not share when NCUA might respond to its request, nor when the member vote may take place.
A spokesperson from Thrivent confirmed to CUToday.info the deal is underway. NCUA declined comment, noting it does not comment on mergers. The credit union said the FDIC-insured Thrivent Bank would seek to operate nationwide via a digital platform. TCU further said it chose to "pursue an industrial bank as opposed to another type of bank charter because it allows Thrivent to provide transparent, high quality banking services to clients and communities across the country while also enabling it to preserve its longstanding status as a fraternal benefit society."
“The board voted to approve the merger proposal and proceed with the next steps of this process because the board believes this merger option is in the best interest of the credit union membership and our staff and is the best option for us to deliver on our mission,” Thrivent CU stated on its website. “There are additional approvals needed from the credit union’s perspective. First, the NCUA will review our Notice of Intent to Merge and Request for Authorization (NIMRA) to proceed with a membership vote. Once approval is received from the NCUA on the NIMRA, we will proceed with a membership vote.
“Ultimately, Thrivent Credit Union’s final decision to merge will be in the hands of our credit union members, through a membership vote. We expect this process to take a number of months as we work through the requirements and preparation, so we appreciate your patience. TCU will continue to share details regarding the proposed merger and the membership vote directly with members once they are available,” the statement concluded.
Thrivent FCU reported $1.872 million in income at the end of the first quarter of 2021, and net worth of 8.04%.
A Challenging Task
Richard Garabedian
Richard Garabedian, counsel with Washington-based Hunton Andrews Kurth LLP, believes that should the credit union receive NCUA approval to proceed with a member vote, it might be a challenging task to get all the votes it needs to move forward.
“The credit union has to get a majority of the members to approve this, and must have at least 20% of the members vote—and they have over 56,000 members,” Garabedian said.
Garabedian added Thrivent CU will have a short time to get all that done with NCUA’s new rules requiring greater transparency with the membership regarding mergers. Over the last decade the agency put new rules demanding greater disclosure into place after a number of credit unions converted to bank charters with very little input from membership and, in some cases, with rich benefits for members of management and the board. Federal credit unions are now required to disclose any benefits paid to management and board as a result of a merger.
“You basically have three weeks or so after the ballots are mailed out, and if you are mailing them you have to account for the mailing days,” he noted. “It’s a pretty big undertaking.”
But what may be simpler for the credit union, compared with other deals in which banks have acquired a credit union, is that Thrivent CU 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.
“The Thrivent Credit Union (TCU) board of directors voted on May 10, 2021 to proceed with the proposed merger with and into Thrivent Bank, a Utah-chartered industrial bank that Thrivent Financial for Lutherans is seeking to establish,” Thrivent CU stated.
In a statement, David Royal, executive vice president of asset management at Thrivent, in a statement said his organization is “continuously exploring strategic options to invest in and build out our banking offerings…”
Skipping a Step
Michael Bell
Both Garabedian and attorney Michael Bell—the pioneer of CU purchases of banks—said based on NCUA rules, the reason the credit union would be able to skip the mutual savings bank step in this case is it isn’t required when being absorbed by an industrial bank.
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 NCUA was not involved, as the credit union had 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.
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.
‘Very Interesting’
“I find this deal very interesting,” said Bell, a partner and co-chair of the Financial Institutions Practice Group at Honigman, LLP, adding he is in favor of NCUA’s new rules regarding transparency with membership about potential mergers. “Nothing happens until the democrat ic process of is complete. Members have to choose to do this. If they choose to do this, their choice should be honored.”
Bell, who has been involved in more than 40 whole-bank agreements, said he believes, “this absolutely could happen. This is doable.”
But Bell does not believe it is the beginning of a trend of banks acquiring or merging in credit unions, similar to the trend credit unions started more than 10 years when Michigan's $1.6-billion United FCU acquiring $81-million Griffith Savings Bank in Indiana.
“I just think the business case for banks buying credit unions is one that is much harder to establish than credit unions buying banks,” said Bell, noting the size of the credit union a bank would likely be interested in would be very large, and therefore less willing to sell than smaller, less successful CUs. “And banks likely would not be interested in those buys. I think there is just a limited number of credit unions that would be willing to sell to a bank that would be attractive to a bank.”
New Controversy?
Will the acquisition of a credit union by a bank spark a new round of debate and heated exchanges between the two industries?
“I think that is a possibility,” said Garabedian. “Why shouldn’t Thrivent CU members be paid for their ownership interest instead of just handing it off to an acquiring credit union? It’s an interesting question, I think,” said Garabedian, who told CUToday.info he is in discussions today with banks considering purchasing a credit union. “Those discussions are in their infancy.”
As CUToday.info has extensively reported, banking trade groups have been lobbying Congress to look closely at credit union purchases of banks, often arguing the deals steal away tax dollars. Bankers also recently called on Congress to implement an “exit fee” on credit unions that buy banks.