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Sunday, 25 October 2015 22:00

Transformational Lake Michigan-United Federal merger to drive economies of scale

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GRAND RAPIDS — Opportunity from a planned retirement and the chance to further drive economies of scale led to the proposed transformational merger between Lake Michigan Credit Union and United Federal Credit Union in St. Joseph.

The deal, which would create one of the largest credit unions in the U.S. with $6 billion in assets and 78 offices in seven states, began when United Federal CEO Gary Easterling in April announced his intent to retire by year’s end.

Seeing an opening, Lake Michigan Credit Union CEO Sandy Jelinski reached out to question whether Easterling and United Federal directors were interested in a conversation about the possibility of merging. United Federal subsequently halted its CEO search and began talks with Lake Michigan that culminated with this month’s signing of a letter of intent.

The Grand Rapids-based Lake Michigan saw in United Federal a growing, like-minded credit union with a similar approach and culture, Jelinski said. Merging the two would generate greater economies of scale and better position the larger credit union to compete and offer favorable rates to members for deposits and lending.

Jelinski described the deal as “two very, very strong and successful companies coming together for the good of the members.”

“It goes back to we were so much alike,” she said. “Economies of scale really matter and it really matters in our world. The fixed costs are there no matter what size you are, so if you can merge together to have a larger, stronger base to serve, more will flow to the members.”

The deal, which was unanimously approved by the boards of directors at both organizations, is expected to close by year’s end pending approval from state and federal regulators.

Combining the two credit unions is not expected to result in senior staffing changes or branch closures. Office locations will retain their current branding, although United Federal Credit Union will change its name to United Credit Union as it merges into Lake Michigan’s state charter.

As executives and directors at United Federal last spring began discussing the merger idea with Lake Michigan, “we saw just outstanding alignment,” Easterling said.

“The more we looked it, the more we said, ‘You know, this could really be a big deal for our membership and create a huge opportunity for not only our members but the communities that we serve,’” Easterling said. “There’s no reason not to do this.”

Part of the thinking was the growth that came after United Federal’s 2006 merger with the former First Resource Federal Credit Union. The merger gave United Federal assets of $700 million. The credit union has since nearly tripled in size.

“If you look at that and how that first merger in 2006 allowed us to grow, think of what the growth trajectory is going to be for the next decade with this merged credit union. It just goes beyond the imagination right now,” Easterling said.

Upon completion of the merger, the organization will serve nearly 500,000 members and employ 1,400 people. The merged credit union’s mortgage services portfolio will total more than $8 billion.

The merger was opportunistic for Lake Michigan Credit Union, rather than strategic, starting with Easterling’s planned retirement, Jelinski said.

“We don’t have a merger and acquisition strategy, other than our ears are always open if something of interest would come up, and this one interested us so we gave it a shot,” Jelinski said.

Jelinski will retain her titles after the close of the deal. Easterling will stay on with the organization through the transition.

Lake Michigan Credit Union as of mid-2015 had 256,592 members at 37 offices in Michigan with total assets of $3.82 billion. Midyear net income totaled $37.0 million, according to a quarterly report filed with the National Credit Union Administration. The credit union this month opened a branch in Bonita Springs, Fla. to serve former customers from Michigan who live there part-time or have permanently relocated.

United Federal Credit Union as of June 30 had 138,541 members with 27 offices in six states — including nine in Michigan — plus assets totaling $1.92 billion and net income of $6.7 million, according to its most recent quarterly report to the NCUA.

Both credit unions do a fair amount of business lending. As of midyear, Lake Michigan listed $272.1 million in member business loans on its NCUA report, and United Federal had $247.1 million.

The deal takes Lake Michigan into new markets in Southwest Michigan, as well as to the five states where United Federal has locations: Arkansas, Indiana, North Carolina, Nevada and Ohio. Lake Michigan intends to grow operations in those states, Jelinski said.

The merger has little branch overlap, except in Holland where both Lake Michigan and United each have two branches. On Holland’s south side, the offices are relatively close.

Lake Michigan plans to maintain and monitor both locations for the next couple of years, Jelinski said.

“Our two locations there are very busy and very strong and so are theirs,” she said. “As far as I’m concerned, there’s no need to do anything other than leave them be.”

Sidebar: Lake Michigan Credit Union

  • Headquarters: Grand Rapids
  • Chief executive: Sandy Jelinski
  • Offices: 37 in Michigan and one in Florida
  • Total assets: $3.82 billion*
  • Total deposits: $2.93 billon*
  • Total loans: $2.79 billion*
  • Member business loans: $271.2 million*
    * as of June 30, 2015

Sidebar: United Federal Credit Union

  • Headquarters: St. Joseph
  • Chief executive: Gary Easterling
  • Offices: 27 offices in six states, nine of which are in Michigan
  • Total assets: $1.92 billion*
  • Total deposits: $1.31 billion*
  • Total loans: $1.65 billion*
  • Member business loans: $247.1 million*
    *as of June 30, 2015
Read 2957 times Last modified on Monday, 26 October 2015 16:32

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