Pending member approval, the 51, 590 members of $805 million Thrivent FCU will receive all their credit union’s reserves plus a dividend upon merging. The bonus will approximate a 12.2% additional return on the members’ $628 million total savings as of June 28, 2024. The total payments will be $76 million.
An example: if a member had $5,000 in total deposits on June 28, 2024, their estimated payout would be $610. Plus they have full access to their savings if they do not wish to keep them with the merger partner, Thrivent Bank.
The payout is an important precedent. For in the current system member-owners receive nothing in ownership acquisitions except rhetoric and future promises.
More vital, could this example encourage more banks to seek acquisitions by offering members a fair deal-a missing factor in today’s intra-industry private cooperative merger games?
Thrivent Bank, is a newly state-chartered Utah based FDIC insured institution. It is indirectly wholly owned by Thrivent, a Fortune 500 company with over $114,000,000,000 in total assets at the end of 2023.
The Valuation-What is a Successful Credit Union’s Actual Market Value?
From the member Notice: A valuation performed by RP Financial, LC in 2021 established the merger value of TFCU to be $76,000,000. The TFCU Board of Directors has determined that in conjunction with the Merger, the members will receive a total distribution in the amount equal to the full valuation of $76,000,000.
At June 2021, the credit union reported a book value (net worth) of $69 million. So members are receiving more than the book value at this valuation date. At September 2024, the net worth had declined to $59 million which included the potential write down (FASB 115 valuation) of $21 million in underwater investments.
This is a fundamental data point that every credit union member-owner should be given in a transaction. Today members are never told the market value of their credit union and the potential for a premium. This has created a false market when a merger transfers operational control to an independent party and the owners receive nothing. Such a valuation should be part of all merger proposal going forward.
Who is Thrivent CU?
Chartered in 2012 the credit union’s mission is to help people achieve financial clarity by providing access to banking products and services that help bring balance to spending, purpose to saving, and intention to managing debt. We strive to put you at the center of everything we do, providing impeccable service and competitive rates, so you can make financial choices aligned with your values and priorities.
Why the Merger with Thrivent Bank?
The following is from the FAQ’s for the merger:
Just as TCU is different from other banks and credit unions, Thrivent intends that the Bank will continue our shared mission of helping people achieve financial clarity so they can live full and purposeful lives. It intends to build a simple and transparent full-service product suite, create easy-to-access digital experiences, and provide direct access to human support, with competitive rates.
Thrivent believes that a purpose-driven bank is differentiated in part by fewer, simpler and more transparent products. This will be manifested in simple, fair, and transparent fee structures, and experienced through behavior-influencing digital experiences that offer contextual and actionable insights and guidance that help customers advance on their path to better financial clarity and wellness.
Post merger: All current accounts will retain their rates, function and features. And, the rates and substantive terms of members’ existing loans and savings products will not change as a result of the Merger
Any Special Payments for Staff?
In many credit union acquisitions of other credit unions, the primary payouts are to the CEO’s and senior executives who set up the merger. The same disclosure is required for this transaction. Here are the details:
Merger-Related Financial Arrangements:
No senior executive officers of TFCU will receive an increase in salary as a result of the Merger.
On October 1, 2021, the TFCU Board of Directors voted to retain current board member Ronald S. Orrick, Sr. as the interim President and Chief Executive Officer of TFCU. A portion of Mr. Orrick’s compensation for his services as interim President and Chief Executive Officer, in the amount of $50,000, is conditional on TFCU successfully merging with and into Thrivent Bank.
There are no change in compensation for staff. The second fact in this disclosure is that this transaction has been underway for over three years.
The Voting Process
The proposal must receive votes from 20% of the total members eligible to vote (47,872). At the time we reach the threshold, regardless if members are voting For or Against the recommended merger, TCU will donate $20,000 to a charitable organization.
Of the votes received, a majority must vote in favor of the merger for the vote to pass.
Online voting will begin on January 7, 2025 through February 5, 2025. A mail ballot will be sent to all members that have not selected electronic communication.
Why the Merger if Nothing is Changing
A video explaining the merger and links to the member letter, official meeting Notice and FAQ’s can be found here.
There are two themes as to why this change is sought, even though the member experience may not be different in the short run.
The dominant motive is access to greater capital: TFCU has a fraction of the capital that Thrivent Bank will enjoy. Thrivent Bank’s capital together with the existing assets of TFCU will permit Thrivent Bank to make investments in improved technology, products, and services.
The second aspect is broader growth potential: As we look to the future, we’ve recognized the need and opportunity to grow and further our mission to serve more people with our differentiated approach to banking
The expected merger outcome: Thrivent Bank will offer a simple and transparent full-service banking product suite, delivered through easy-to-access digital experiences and direct access to human support, with competitive rates and fees. Ultimately, Thrivent Bank will help people achieve financial clarity, enabling lives full of meaning and gratitude.
What This Example Could Mean for the Cooperative system
In addition to a process that reveals the market value of a credit union in an acquisition, there is potentially a more consequential outcome.
It is this: If credit unions can buy banks an increasingly common growth strategy, why can’t a bank with a mission, purpose and abundant capital take Thrivent’s model to other credit unions around the country. This would open up true market options that are now not sought out in today’s rigged merger transactions. The members then have a real choice. They can receive full value for their loyalty, choose to stay with the acquirer or take their relationships elsewhere if not pleased.
Today credit unions are readily paying 1.5X to 2.0X book value to acquire a bank. But member-owners are rarely offered anything in such mergers for their ownership and years of loyalty.
Credit union professionals have been taking advantage of members in the current merger-driven, CEO’s private deal making process. It’s time real market options are required for the members’ benefit. Thrivent FCU’s disclosures and payments should be an example required in all future coop acquisitions. Then members can hope to receive a fair deal.