Two Michigan Credit Unions Seek Merger

Two Detroit-area credit unions announced Thursday they will seek permission to merge.

The smaller MemberFocus Community Credit Union of Dearborn, Mich. ($133.6 million, 8,182 members) has proposed to acquire the larger LOC Federal Credit Union of Farmington, Mich. ($310.6 million, 24,688 members).

The plan is to retain MemberFocus’ state charter but rename it LOC Credit Union. If approved by regulators and cleared after due diligence, a vote by LOC members is expected in early 2022 and the merger would be complete by July 1.

Stephen Grech, who became LOC FCU’s president/CEO in December 2019, will become president/CEO of the new LOC Credit Union. MemberFocus Community President/CEO Jon Elliott would become senior EVP after the merger.

MemberFocus had 20 full-time employees and one part-time employee as of June 30, while LOC FCU had 46 full-time and 11 part-time employees.

No layoffs or branch closings have been planned. The new credit union will use the LOC FCU headquarters in Farmington, 22 miles northwest of Detroit.

After the merger, it would have five branch locations, including one in Farmington, one in Howell, 32 miles west of Farmington, and one in Hartland, 30 miles west of Farmington. The two branches in Dearborn, 16 miles southeast of Farmington, would operate as MemberFocus Community Credit Union, a division of LOC Credit Union.

During the approval process, MemberFocus Community will seek a state-wide field of membership through the Michigan Department of Insurance and Financial Services.

“This merger allows LOC to retain its identity, leadership team and strategic goals while leveraging MemberFocus Community Credit Union’s state charter, financial strength and the economies of scale that can be achieved as a larger financial institution,” LOC CU Chair Michael Lasley said. “We are excited about extending our value propositions to the MemberFocus Community Credit Union membership in the near future.”

In December 2018, NCUA approved a plan for Our Credit Union of Royal Oak, Mich., which then had $247 million in assets, to acquire MemberFocus, which then had $103 million in assets. That deal fell through.

MemberFocus Community Chairperson Betty Richards said the merger with LOC FCU would allow the credit union to further develop products and services for its members.

“More products, more services, increased access to locations and technology will enhance the member experience,” she said. “We are very excited about this partnership with LOC Credit Union.”

Both credit unions are generating net income, but membership growth is sluggish and loans have fallen at MemberFocus Community.

Both credit unions’ net worth ratios have eroded in the past year, but remain above the NCUA’s 7% threshold to be classified as “well capitalized.” On June 30, LOC’s net worth ratio was 8.36%, down 96 basis points from a year earlier. MemberFocus Community’s was 9.57%, down 56 bps from a year earlier.

LOC FCU had $930,246 in net income in the first six months of 2021, which was an annualized 0.63% of its average assets, down from 0.86% ROA in 2020’s first half. MemberFocus Community’s net income was $190,981 and its ROA 0.29% in the first half, down from 0.45% in 2020’s first half.

LOC FCU’s loan originations were $48.5 million in the first half of 2020, more than double 2020’s first half. Its loan balance was $159.9 million on June 30, up 28.1% from a year earlier.

MemberFocus Community’s loan originations fell 6.8% to $10.7 million in the first half, while its loan balance fell 8.2% to $44.8 million on June 30.

For all credit unions, Callahan & Associates estimates first half originations grew 24%, while CUNA estimates loan balances grew 4.8% in the 12 months ending June 30.

LOC FCU’s membership rose 0.9% in the 12 months ending June 30, while it grew 1.4% at MemberFocus Community. CUNA estimated membership grew 3.5% for all credit unions in that time.

The NCUA approved 41 mergers in the second quarter, 24 of them to allow expanded services. The remaining 17 were because of poor financial condition, loss of sponsor support, declining or loss of membership, lack of growth or inability to obtain officials.