Thrivent Financial Bank Heads Back to the Future
Longtime customers of Thrivent Financial Bank, an Appleton, Wis.-based bank with credit union roots, may experience confusion and feelings of déjà vu in the coming months as the bank returns to being a credit union.
The $550 million bank is a subsidiary of Thrivent Financial for Lutherans, the largest mutual insurance company in the country and has been since 2001, when the insurer formed it out of two existing credit unions.
“In today's environment, a member-owned and member-governed credit union is a natural fit for Thrivent,” Jim Thomsen, senior vice president of member services for the insurer, wrote to TFL members in a company newsletter.
“Through this credit union, we will be able to offer even more competitive products and services, build value for our membership and reinforce the benefits that come from being a Thrivent Financial member,” he concluded.
The bank has declined a request for an interview until it gets more into the charter change's regulatory process. But a long message to members laid out some of the parameters for what the insurer has planned for the bank and the new CU.
Essentially, what is being planned is less of a charter change than a charter launch. In a charter change, the entire entity changes with the charter. Aspects of the institution that might not fit the new charter model are either sold or dissolved.
But in this circumstance, TFL plans to continue to have the bank as a subsidiary, reserving to itself. Regular banking products and services, the checking, savings and lending that make up retail banking will move to a newly chartered and launched credit union. Current bank depositors will be grandfathered in as members of the new credit union, but most new depositors would have to become members of TFL in order to participate in the CU, the insurer said.
TFL cited three reasons for making the move now. First, members will benefit from having a CU, and a credit union “will be consistent with Thrivent's focus on member ownership,” the CU said in its message to customers.
Second, the insurer cited advantages of being a credit union, but did not lay out what they were, that it said would allow the CU to offer “more competitive products and services to Thrivent members.”
Finally, the insurer alluded to regulatory changes that it said made starting a credit union make more sense.
“Recent financial services regulations now place new and costly regulatory burdens on insurance companies, like Thrivent, that own and operate banks. By establishing a new credit union that is not subject to some of these regulations, we will be better able to maintain and build value for Thrivent's membership.”
The insurer said it anticipated the new CU would be launched sometime in the first half of 2012 but acknowledged it had a number of different steps to take and hurdles to cross to make it happen.
One of those will be moving from the FDIC for deposit insurance to the NCUSIF for share insurance and to NCUA for examinations, a process that the agency acknowledged it has not had to oversee that often.
“The process is much the same as if you were chartering a new credit union,” explained NCUA spokesman David Small. “Once a federal credit union is organized and NCUA’s Office of Consumer Protection issues a charter, then it would acquire the relevant parts of the other institutions that are allowable under the FCU Act.
"This would likely occur through a purchase and assumption. If the former institution had assets that are not allowed under the FCU Act or under NCUA rules, such as investments, then they would have to be liquidated or sold prior to consolidation."
The latest bank-turned-credit union prior to Thrivent is the now 301,000 member $4.1 billion ESL Federal Credit Union, headquartered in Rochester, N.Y.
ESL started life as a federally chartered Eastman Savings and Loan Association in 1920. George Eastman, founder of Eastman Kodak, founded the bank to serve Kodak company employees, particularly in obtaining mortgages, according to the credit union's website.
In 1996 the bank, which had always operated like a credit union, went ahead and changed charters, in part to expand is appeal to the community beyond Kodak employees.
After at least one major CU merger in 2002, the CU took on the employees of the Wegman's supermarket chain as well, and the CU now has 19 branches and 40 ATMs in the Rochester area.
Reaction to the Thrivent news has been muted. NAFCU CEO Fred Becker said it was “always great to have a new credit union, especially one that recognizes the value of the credit union model over other alternatives.”
CUNA CEO Bill Cheney said his trade group also welcomed the move. “We welcome their steps in offering credit union services to their members and invite other banks with an interest in providing their customers a better value to consider such a move as well,” Cheney said.
The Wisconsin Credit Union League did not have a comment prepared as of press time.
Alan Theriault, president of CU Financial Services, a consulting firm which helps credit unions change to bank charters, refrained from making any comments about the Thrivent move and the CU charter but put the move in the context of a broader trend he had noticed among insurance companies and banking.
Many insurance companies had started banks and then been forced to back off after they found that the business model had not been as easy to adapt as they imagined, Theriault explained. In addition, the margins on the banking business were not as favorable as they had been, he added.
He also observed that the insurer had not mentioned how it planned to capitalize the CU. “When they dissolved those two CUs in 2001, the capital went back to the members, so I would be curious about how the plan to capitalize it now,” he said.