GRAND RAPIDS — Nearly a year after closing on the acquisition of a community bank on Florida’s Gulf Coast, Lake Michigan Credit Union could extend its footprint further in the Sunshine State.
By following members who are migrating south for the warmer climate in retirement, the Grand Rapids-based Lake Michigan Credit Union is presently looking at other community banks in Florida, said President and CEO Sandra Jelinski.
“We are open for more, definitely,” Jelinski told MiBiz. “Unfortunately, there are not a lot of community banks left down there, but there still are some opportunities.”
Lake Michigan Credit Union entered the Florida market in mid 2015 with the opening of a mortgage office in Bonita Springs, followed by a full-service branch that November in Ft. Meyers. The credit union expanded to four branches in southwest Florida over a few years, and more than doubled to 10 offices with the April 2018 acquisition of the $391.6 million (assets) Encore Bank in Naples.
The credit union decided to move into Florida for two strategic reasons. The state has a comparative lack of credit unions in some areas. As well, Lake Michigan wanted to serve members who are retiring and either moving to Florida or living there during the winter.
As the Baby Boomer generation continues to retire, Lake Michigan saw a business opportunity to follow them south, Jelinski said.
“There are people who are down there who are our prominent members and we do not want lose them. That drove us to go to Florida and to test the waters because we want to be where they are,” she said.
Lake Michigan Credit Union could extend its Florida footprint in existing markets, or eastward to the Atlantic coast and other areas of the state where it has retired members who ask “‘why aren’t you on this side?’” Jelinski said.
Jelinski first saw the opportunity to enter the market while attending an industry conference in Florida about five years ago and “I noticed there weren’t credit unions.”
As of the third quarter of 2018, Florida had 133 state- and federally-chartered credit unions with 5.5 million members in a state with a population of 21 million people, according to the League of Southeastern Credit Unions. By comparison, Michigan as of Sept. 30, 2018, had 224 credit unions with 5.3 million members in a state with a population of 9.9 million residents.
Part of the business opportunity in Florida for Lake Michigan Credit Union comes from the Great Recession a decade ago that hit banks hard, Jelinski said. A number of community banks in Florida did not survive, opening an opportunity for other players to expand or to move into the market.
“They really have a need for a local player that caters to the people,” Jelinski said. “It’s been a big undertaking, but so far, so great.”
Lake Michigan Credit Union today has more than 5,000 customers in Florida.
Michael Bell, an attorney at Royal Oak-based Howard & Howard PLLC who specializes in credit union acquisitions of community banks, describes Florida as a market that’s “under credit unioned.”
Some areas of the state — such as Tampa and Jacksonville — have large, strong credit unions with sizeable market shares. Southwest Florida where Lake Michigan has a presence has “very low” competition by comparison, Bell said.
Further opportunity exists for credit unions to expand into or enter the Florida market by acquiring a community bank, he said.
Two deals involving a credit union’s acquisition of a community bank are pending in Florida and one more is in the works, Bell said. Investment bankers representing community banks seeking to sell have “really embraced the idea of adding credit unions in the mix” in their bid processes for sellers, he said.
“There are banks in Florida selling for just a lot of reasons,” said Bell, who represented Lake Michigan in the Encore Bank acquisition. “There’s more for them (LMCU) to do, no question, if they’re interested.”
The industry trend is not unique to Florida.
In Michigan, three deals are pending between credit unions and banks, including Lake Michigan’s proposed acquisition of a Citizens Community Federal Bank branch in Rochester Hills. The other deals are Parchment-based Advia Credit Union’s planned acquisition of Golden Eye Community Bank in Woodstock, Ill., and Ferndale-based Credit Union One’s acquisition of Hantz Bank in Southfield.
Home market growth
Lake Michigan looks to expand in Florida coming off what Jelinski describes as a “very, very good year” in 2018.
The credit union reported record net income of $98 million for the year and grew assets 16 percent to $6.06 billion as of Dec. 31, 2018, up from $5.22 billion a year earlier, according to a financial statement filed with the National Credit Union Administration.
Of the $840 million in asset growth in 2018, $391.6 million came from the Encore Bank acquisition. Minus the Encore Bank assets, Lake Michigan Credit Union still grew assets 8.6 percent for the year.
At the end of last year, the credit union had total deposits of $4.84 billion and $4.94 billion in net loans, including $588.2 million in commercial loans, according to the NCUA report.
Lake Michigan continues footprint expansion in its home state as well. The credit union, with 42 offices in Michigan, in December opened a branch on Sherman Boulevard in Muskegon and plans to open an office this spring in Ann Arbor, its first in the market.
“Our goal is to continue to attract as many people to use our services as possible,” Jelinski said.
The credit union’s membership grew 9.5 percent to 351,030.
Lake Michigan Credit Union has considered expanding into other states in the future, Jelinski said. Arizona represents the second-largest destination where members are retiring, she said.
“Right now, because we are so new into Florida, we will see how that plays out. We are open to listening to our membership and where they want us to be,” she said. “The future’s wide open, I’d say.”