Press Releases

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Empeople CU to acquire substantially all assets of Wisconsin-based TSB Bank

Press Release: 2.27.24 | Jasmine Castroverde and Rica Dela Cruz 

Empeople CU on Jan. 30 agreed to acquire substantially all assets and assume substantially all liabilities of TSB Bank.

The transaction is expected to be completed in the fourth quarter, subject to regulatory approvals, TSB Bank shareholders' approval and other customary closing conditions.

After the deal closes, TSB Bank will liquidate, dissolve and distribute its remaining assets to its shareholders. The bank's customers will become members of Empeople CU.

S&P Global Market Intelligence valuations for bank and thrift targets in the Midwest region between Jan. 30, 2023, and Jan. 30, 2024, averaged 128.55% of book and 134.16% of tangible book, and had a median of 17.38x last-12-months earnings, on an aggregate basis.

Moline, Ill.-based Empeople CU has about $2 billion in assets and operates 29 branches in Illinois, Iowa, Maine, North Dakota, North Carolina, Wisconsin and Georgia. Lomira, Wis.-based TSB Bank, which has three branches serving the eastern Wisconsin area, had $182 million in assets and $151 million in deposits, according to a news release.

McQueen Financial Advisors served as financial adviser and Luse Gorman PC was legal counsel to Empeople CU. Bancorp I Inc. was financial adviser and Reinhart Boerner Van Deuren s.c. acted as legal counsel to TSB Bank.

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Global Credit Union and First Financial Northwest, Inc. Announce Agreement for Global Credit Union to Acquire First Financial Northwest Bank

Press Release: 1.12.24

Anchorage, Alaska and Renton, Washington – January 11, 2024 – Global Federal Credit Union (“Global”) and First Financial Northwest, Inc. (“First Financial Northwest”) (NASDAQ GS: FFNW) announced today they have entered into a definitive agreement in which Global will acquire Renton, Washington-based First Financial Northwest Bank, a wholly-owned subsidiary of First Financial Northwest. The transaction is structured as a purchase and assumption agreement with Global purchasing substantially all assets and assuming substantially all liabilities of First Financial Northwest Bank for the all-cash consideration of $231.2 million, subject to certain adjustments.

The agreement has been unanimously approved by the boards of directors of both institutions. Following the purchase and assumption transaction, First Financial Northwest and First Financial Northwest Bank intend to wind down and dissolve. Based on First Financial Northwest’s outstanding shares on a fully-diluted basis as of December 31, 2023, and after taking into consideration the anticipated satisfaction of certain obligations of First Financial Northwest and First Financial Northwest Bank excluded from the purchase and assumption transaction, including holding company indebtedness and tax liabilities, First Financial Northwest expects that its shareholders would be entitled to receive approximately $23.18 to $23.75 per share upon liquidation, subject to certain adjustments. If certain conditions occur prior to closing, including but not necessarily limited to a decline in deposits, an inability to refinance or sell certain loans prior to closing, and other potential reductions outlined in the Purchase and Assumption Agreement, the actual amount received could be below this range.

The transaction will expand Global’s business and commercial services to all its member businesses as well as enhance its branch presence in Western Washington, where it first began operations 40 years ago. First Financial Northwest Bank customers will become members of Global Federal Credit Union with full access to Global’s extensive product and service offerings.

“We are enthusiastic about combining two financially sound institutions that share a strong commitment to service and community engagement,” said Geoff Lundfelt, President and CEO of Global Federal Credit Union. “This combination will continue to enhance service delivery and growth in a market that the credit union has been operating in for over four decades, adding numerous branches. First Financial Northwest Bank’s branch network has a technology-forward design, accelerating the transformation to an environment with a structure and atmosphere more suited to conducting business in the future.”

The ability to offer expanded business and commercial financial products and services to Global’s existing membership is a significant strategic step for the credit union,” continued Lundfelt. “This acquisition also affords the customers of First Financial Northwest Bank access to the consumer products and world-class service Global members currently enjoy.”

Lundfelt concluded, “Global will receive tremendous value from this transaction. The projected future earnings from the acquisition of First Financial Northwest Bank’s franchise justify the pricing of the transaction and are expected to be accretive to Global from a financial perspective.”

Joseph W. Kiley III, President and CEO of First Financial Northwest Bank added, “First Financial Northwest Bank has earned the trust of its customers and the communities it serves for over a century by holding true to its values of building long-term banking relationships, offering high-quality banking products and services, providing exceptional customer service, and demonstrating a strong commitment to community. In today’s competitive environment, we believe this strategic transaction provides numerous benefits for our customers, our communities, and our employees. In addition, this transaction delivers substantial value to our shareholders who have supported us over the years.”

The transaction is anticipated to be completed in the fourth quarter of 2024 subject to receiving all regulatory approvals, approval by the shareholders of First Financial Northwest, and other customary closing conditions. Until the transaction is finalized, both organizations will continue to conduct business as usual.

Global was advised by McQueen Financial Advisors, as financial advisor, and Honigman LLP, as legal counsel. First Financial Northwest was advised by Janney Montgomery Scott LLC, as financial advisor, and Fenimore Kay Harrison LLP, as legal counsel.

Global was founded in Anchorage, Alaska, in 1948 and currently has approximately 2,000 employees, operations in five states and Italy, and 750,000 members spread across all 50 states and 20 foreign countries. With over $11 billion in assets, Global is one of the 20 largest credit unions in the United States. Global first began operations in Washington state after a series of mergers in Oak Harbor and the Greater Seattle area beginning in 1983. Global has 27 branches and serves over 180,000 members across Washington state.

Established in 1923 in Renton, Washington as the Renton Savings and Loan Association, First Financial Northwest Bank has transformed over the years from a single branch thrift to a full-service community-based commercial bank with over 150 employees delivering unique and innovative solutions to its customers in the Puget Sound Region. At September 30, 2023, First Financial Northwest had total assets of $1.53 billion and deposits of $1.21 billion.

More about Global Credit Union

Global Credit Union is a not-for-profit, member-owned financial cooperative with a mission of enriching lives through world-class financial services. Global, a low-income designated credit union, was founded in 1948 at the Alaska Air Depot, and now serves more than 750,000 members online and in 77 branches across Washington, Alaska, Idaho, California, Arizona, as well as branches on three U.S. military installations in Italy. Learn more at globalcu.org.

More about First Financial Northwest, Inc.

First Financial Northwest, Inc. (NASDAQ GS: FFNW) is the parent company of First Financial Northwest Bank; an FDIC insured Washington State-chartered commercial bank headquartered in Renton, Washington, serving the Puget Sound Region through 15 full‑service banking offices. Learn more at ffnwb.com.

Additional Information and Where to Find It

This communication has been prepared in respect of the proposed transaction involving First Financial Northwest, Inc. and Global Credit Union and does not constitute a solicitation of any vote or approval. In connection with the proposed transaction, First Financial Northwest will mail or otherwise provide its shareholders with a proxy statement and other relevant documents concerning the proposed transaction and expects to file the proxy statement on Schedule 14A with the Securities and Exchange Commission (SEC), as well as other relevant documents concerning the proposed transaction. Shareholders of First Financial Northwest are urged to read carefully and in their entirety the proxy statement and any other relevant materials mailed to them or filed, or to be filed, with the SEC when they become available because they contain or will contain important information about the proposed transaction and related matters. First Financial Northwest shareholders may obtain copies of these documents free of charge from First Financial Northwest at the investor relations link on its website, www.ffnwb.com or by directing a request by mail or telephone to First Financial Northwest, 201 Wells Avenue South, Renton, Washington 98057, Attn: Investor Relations, (425) 255-4400.  Copies of those documents filed with the SEC may be obtained free of charge through the website maintained by the SEC at www.sec.gov.

Participants in the Solicitation

First Financial Northwest and certain of its directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of First Financial Northwest in connection with the proposed transaction under the rules of the SEC. Certain information regarding the interests of these participants and a description of their direct and indirect interests, by security holdings or otherwise, will be included in the proxy statement regarding the proposed transaction when it becomes available.  Additional information about First Financial Northwest and its directors and executive officers is set forth in First Financial Northwest’s Annual Report on Form 10-K filed with the SEC on March 13, 2023, and in the proxy statement for First Financial Northwest’s 2023 annual meeting of shareholders, as filed with the SEC on March 24, 2023. These documents can be obtained free of charge from the sources described above.

Safe Harbor for Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the financial condition, results of operations, business plans and the future performance of First Financial Northwest.  Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “projects,” “could,” “may,” “should,” “will” or other similar words and expressions are intended to identify these forward-looking statements.  These forward-looking statements are based on First Financial Northwest’s current expectations and assumptions regarding First Financial Northwest’s and Global’s businesses, the economy, and other future conditions.  Because forward-looking statements relate to future results and occurrences, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Many possible events or factors could affect First Financial Northwest’s or Global’s future financial results and performance and could cause actual results or performance to differ materially from anticipated results or performance.  Such risks and uncertainties include, among others:  the occurrence of any event, change or other circumstances that could give rise to the right of one or all of the parties to terminate the definitive agreement, the outcome of any legal proceedings that may be instituted against First Financial Northwest, the Bank or Global, delays in completing the transaction, the failure to obtain necessary regulatory approvals and shareholder approvals or to satisfy any of the other conditions to the transaction on a timely basis or at all, the possibility that the anticipated benefits of the transaction are not realized when expected or at all, including as a result of the impact of, or problems arising from, the dissolution of the Bank and First Financial Northwest, the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events, diversion of management’s attention from ongoing business operations and opportunities, potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transaction, and the ability to complete the transaction and integrate the Bank’s customers, assets, and liabilities into Global successfully.  Any of the forward-looking statements that we make in this press release and in the other public statements are based upon management’s beliefs and assumptions at the time they are made and may turn out to be wrong because of the inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. Except to the extent required by applicable law or regulation, First Financial Northwest disclaims any obligation to update such factors or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments.  Further information regarding First Financial Northwest and factors which could affect the forward-looking statements contained herein can be found in First Financial Northwest’s Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and its other filings with the SEC.

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LLCU completes acquisition of Nokomis Savings Bank

Press Release: Cayla Hittmeier, Chief Marketing Officer 11.13.2023

DECATUR, IL (November 13, 2023) — LLCU of Decatur, IL, announced today the completion of its purchase and assumption transaction with Nokomis Savings Bank in which LLCU has acquired the assets and assumed the liabilities of Nokomis Savings Bank, which was effective Friday, November 10th at 12:00a.m.(CT). With the acquisition complete, LLCU has expanded its footprint to include a total of 15 branches throughout a 28-county service area in Central Illinois.

“We have already received a very warm welcome by the Nokomis community,” stated Robert Ares, LLCU President & CEO. “That warm welcome just further confirms that adding the Nokomis branch to the LLCU organization was a smart move. This acquisition will undoubtedly prove successful for LLCU, but more importantly, we are confident that citizens of Nokomis will be very happy with our superior financial products and services, as well as our dedication to community investment.”

The acquisition is part of LLCU’s strategic growth plan, which includes adding branches and markets to better assist members in Illinois. Most recently, LLCU previously acquired Colchester State Bank of Colchester, IL, finalized in July of 2023. With the Colchester acquisition, LLCU’s geographic footprint extended to McDonough County, extending the LLCU service coverage area to 28 Illinois counties.

McQueen Financial Advisors served as financial advisor and Luse Gorman, PC served as legal counsel to Land of Lincoln Credit Union.

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Why Some CUs May Be Taking Hit to Equity Ratio

Press Release: Ray Birch 10.4.2023

CLAWSON, Mich.—If a credit union is cutting back on lending because its CECL number has spiked, one analyst is suggesting it might be time to gain a better understanding of the CECL model it is using.

The concerns at many CUs and resulting policy changes are coming about as credit unions begin to phase in the CECL accounting standard.

Charley McQueen, president and CEO of McQueen Financial Advisors, which provides consulting services around current expected credit losses (CECL) to credit unions, said he has seen credit unions look to reduce lending in response to an increase in their CECL numbers as they have also moved to quickly increase their corresponding reserves.

But when that happens, he said, it’s a warning sign the CECL model itself may be the reason for the increase. He cautioned against CECL models that are often termed a “black box”—where the assumptions, decisions and rules within the model are not transparent.

“CECL is being slowly phased in over a number of years, so a credit union shouldn't have had an equity hit from it,” said McQueen.

McQueen said if a credit union is taking a hit to its equity ratio, then the credit union is either implementing CECL incorrectly or it’s not charging enough for the loans that have gone delinquent.

“They might be doing some really bad lending by not putting in a good enough yield and are therefore making a negative return,” he observed.

‘Doubled for No Apparent Reason’

McQueen said he is personally not aware of any credit unions that have reported reducing their lending volume as a result of CECL, but CUToday.info has received a report from a credit union leader who asserts the issue is occurring among a number of credit unions in his area.

“We've had a number of clients come over to our CECL model, leaving other providers that have what they call a black box model,” explained McQueen. “People are calling us and saying ‘Our CECL number doubled for no apparent reason last month, and the service provider we use can't explain to us why it doubled’.”

McQueen’s response is that “is not logical. CECL is very mathematical. You have your historical losses. You have your forward economic projections and your current economic projections, and you put it all together and should be able to trace back every single modification to your CECL number.”

No Surprises

He stressed there should be no surprises with CECL. And yet, the surprises continue.

“But we have more and more people coming over to us because of these black box models,” he said. “They are just causing significant problems. CECL should not be a big problem. It's a known quantity. So, we're really surprised by some people's response to some of the problems they’re saying they’re having.”

McQueen shared the example of a client who had a $1.5-million CECL reserve.

“Their report came out one month and said they suddenly needed to have a $3-million CECL reserve,” McQueen said. “That would be a direct hit to income. They don't make a million half dollars a month. It turned out they simply had a CECL model that was faulty, causing them to put significantly bigger numbers in (than was necessary). If CECL (reserves) are going up for unknown reasons, something is wrong.”

The Need for Quantifiable Numbers

However, if the CU’s economic forecast is looking worse going forward, that could cause CECL numbers to go up, McQueen noted.

“But, it all should be quantifiable,” he said. “One of the best predictors of losses historically has been the unemployment rate. If you don't have a job you can’t pay your bills. That's where we look right now. The Fed’s projected unemployment rate is really quite low. So, while you know maybe a little bit of uncertainty is coming down the road, we're not seeing that hitting unemployment predictions, yet. Again, I don't see why CECL numbers would be going up substantially. You shouldn't see massive swings unless there is a significant problem within the credit union or if all of a sudden the unemployment rate jumps to 5%, 6% or 7%.”

McQueen said one exception would be any credit union with a sizeable commercial real estate portfolio, which could very well be experiencing an increase in its CECL number.

Finding a New Provider

McQueen stressed if certain questions can’t be answered, a credit union needs to find a new vendor.

“Every CECL provider should be able to explain to you the changes in any month, what happened and why,” he said.

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Credit union-bank M&A logjam breaking with 3rd deal in 2 months

Press Release: Lauren Seay and Ronamil Portes 8.8.2023

As many banks' M&A interest remains frozen by the interest rate environment and recent industry tumult, credit unions' appetite for deals with banks is unthawing.

Harborstone CU's planned acquisition of Seattle-based First Sound Bank marks the fifth such deal this year, lagging 2022's record of 16 such M&A announcements. However, that activity has picked up recently with three announcements in the span of two months. Credit union acquisitions by banks make up 9% of all US bank deal activity so far in the year.

The latest deal, which was motivated by an attractive price tag for the seller and geographic expansion for the buyer, used a unique equity provision to overcome current mark-to-market hurdles.

Price tag
First Sound Bank was set to be acquired by BM Technologies Inc. in an all-cash deal for about $7.22 per share, but that transaction fell apart in December 2022 after facing regulatory hurdles. Banks began calling and expressing interest in a new deal shortly after the termination was announced, although the spring industry tumult that led to three regional bank failures also dried up bank M&A discussions completely, President and CEO Marty Steele said in an interview.

"Everybody got spooked," Steele said. "The state of the market right now for bank M&A is terrible. I think the only reason that I had interest is because of scarcity value."

There are currently 14 banks with less than $10 billion in assets headquartered in the Seattle-Tacoma-Bellevue, Wash., metropolitan statistical area, according to S&P Global Market Intelligence data. Nine of those have less than $1 billion in assets.

Harborstone CU was not spooked, and when it made an unsolicited offer, it was too good to pass up, Steele said.

First Sound Bank shareholders will receive about $6.90 to $7.10 per share in cash. The $22.4 million deal values First Sound Bank at 150.96% of tangible common equity, above the median of 135.19% for US bank deals so far this year, according to Market Intelligence data.

Credit unions must pay cash when acquiring banks because they do not have stock. An all-cash deal was attractive to First Sound Bank because it "removes the risk from the shareholders of having to get stock," Steele said.

Many factors go into the price a credit union can pay to acquire a bank. Sometimes, credit unions' tax-exempt status allows them to pay a higher price than another bank could. But an issue of "double taxation" also plays into the higher prices because if a bank is structured as a C-corporation, the deal will be taxed twice — once at the corporate level and again at the shareholder level.

Traditional bank M&A deals are typically structured as a sale of stock, avoiding the double taxation. The double taxation issue is "always a factor" in credit union deals, Steele said.

In an interview with Market Intelligence, Harborstone CU President and CEO Geoff Bullock said the price was based entirely on First Sound Bank's projected forward earnings.

The price is "comparable to building a branch in Seattle, but imagine you're building a branch that already has $175 million of deposits in it and a really robust loan portfolio," Bullock said. "It's a home run."

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Harborstone Credit Union Announces Agreement to Acquire First Sound Bank

Press Release: Jasmine Castroverde 8.1.2023

Lakewood and Seattle, Washington Harborstone Credit Union announced today it has entered into a definitive agreement to acquire Seattle, Washington-based First Sound Bank (OTCPK: FSWA). The transaction is structured as a purchase agreement with Harborstone Credit Union purchasing substantially all assets and assuming substantially all liabilities of First Sound Bank.

The transaction has been unanimously approved by the boards of directors of both institutions. Following the completion of the transaction, First Sound Bank will liquidate and dissolve and distribute its remaining assets to its stockholders. When finalized, the combined institution will have approximately $2.1 billion in assets, $1.5 billion in loans, $1.8 billion in shares and deposits and will have sixteen branches throughout King, Pierce, and Thurston Counties. In connection with the transaction, the shareholders of First Sound Bank will receive approximately $6.90-$7.10 in cash for each share of First Sound Bank common stock, subject to adjustment based on the equity value at closing.

The acquisition helps Harborstone Credit Union grow its presence in the Seattle market, diversify its assets, and add superior talent and expertise. First Sound Bank customers will become members of Harborstone Credit Union with full access to all Harborstone Credit Union's expansive product and service offerings. The transaction serves as a historic milestone, as First Sound Bank is the first bank Harborstone Credit Union will acquire.

Geoff Bullock, President and CEO of Harborstone Credit Union, commented, "We're excited to grow Harborstone Credit Union and owe this opportunity to the decades of smart and strategic decisions that have created a solid foundation for our expansion. This acquisition is a win for everyone involved as it provides extended services and products to First Sound's clients, and adds new expertise and services to Harborstone Credit Union's members. From all of us at Harborstone Credit Union, we extend a warm welcome to First Sound, its employees, and its customers."

Marty Steele, President and CEO of First Sound Bank added, "We are extremely excited about partnering with Harborstone Credit Union and feel that this strategic transaction provides many benefits for our customers, employees, community and shareholders. As a community bank we are deeply focused on providing resources and services for our customers to succeed, and feel that the additional services, products and locations Harborstone Credit Union provides will help us continue to meet the needs of our customers in this competitive environment. In addition, this transaction provides excellent value to our shareholders who have supported us over the years."

The transaction is anticipated to be completed in the first quarter of 2024 subject to receiving all regulatory approvals, approval by the shareholders of First Sound Bank and other customary closing conditions.

Harborstone Credit Union was advised in the transaction by McQueen Financial Advisors as exclusive financial advisor and Luse Gorman, PC as legal counsel. First Sound Bank was advised by D.A. Davidson & Co. as exclusive financial advisor and Keller Rohrback, L.L.P. as legal counsel.

About Harborstone Credit Union
Harborstone Credit Union is a Washington-chartered and federally insured credit union headquartered in Lakewood, Washington. Founded in 1955 as McChord Federal Credit Union, serving airmen on McChord Air Force Base (now Joint Base Lewis McChord), Harborstone Credit Union has grown to become one of the largest credit unions in Washington State with over 87,000 members and approximately $1.9 billion in total assets. Harborstone Credit Union has fifteen branches located throughout King, Pierce, and Thurston counties and offers members a full range of products and services with the aim to assist members in achieving financial well-being through innovative financial solutions that foster thriving communities and economic vitality. For more information, please visit www.harborstone.com.

About First Sound Bank
First Sound Bank is a locally owned, independent community bank with approximately $175 million in assets. The company provides commercial and private banking services for small to medium sized businesses, not-for-profit organizations, entrepreneurs, and professional service firms throughout the Puget Sound market. First Sound Bank operates through a single branch location in downtown Seattle. For more information, please visit www.firstsoundbank.com.

Forward Looking Statements
Certain statements in this news release contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to future plans and expectations, and are thus prospective. Such forward-looking statements are subject to risks, uncertainties, and other factors, such as the businesses of Harborstone Credit Union and First Sound Bank may not be integrated successfully or such integration may take longer to accomplish than expected, the expected cost savings and any revenue synergies from the merger may not be fully realized within the expected timeframes, disruption from the merger may make it more difficult to maintain relationships with customers, associates, or suppliers, the required governmental approvals of the merger may not be obtained on the proposed terms and schedule, or First Sound Bank shareholders may not approve the merger, any of which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Therefore, we can give no assurance that the results contemplated in the forward-looking statements will be realized. The inclusion of this forward-looking information should not be construed as a representation by the companies or any person that the future events, plans, or expectations contemplated by the companies will be achieved. All subsequent written and oral forward-looking statements concerning the companies or any person acting on their behalf is expressly qualified in its entirety by the cautionary statements above. None of Harborstone Credit Union or First Sound Bank undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, to reflect circumstances or events that occur after the date the forward-looking statements are made.

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Credit union-bank M&A stalemate subsides with 2 deals in 1 week

Press Release: Lauren Seay, David Hayes 6.12.2023

Credit union-bank deals showed signs of life with two announced in one week, and advisers say more are on the way.

All In FCU and Nusenda FCU kicked off the month of June with their announced acquisitions of SunSouth Bank and Western Heritage Bank, respectively. The two transactions mark the third and fourth such deals this year as credit union-bank deal activity has been slow, much like traditional bank M&A. Uncertainty has kept most banks on the dealmaking sidelines, but credit unions' appetite has not wavered.

"The issue is not on the credit unions having an interest because that has remained strong," Greg Cunningham, senior vice president at Donnelly Penman & Partners, said in an interview. "It's just that the sellers have not been willing to come to the table and engage."

That dynamic created a "stalemate," Cunningham said, but banks are very slowly showing more interest in M&A. Both Cunningham and Charley McQueen, president and CEO of McQueen Financial Advisors, said they have seen a slight uptick in banks coming to the negotiating table, and credit unions are eager to pounce on deals that arise.

"From a credit union buyer standpoint, they remain ready and able. ... I just don't think that there's nearly as many opportunities that are presenting themselves as maybe what we've seen over the last couple of years," Cunningham said. "[But] we're starting to see a little bit more activity as of late with some opportunities presenting themselves."

McQueen has three credit union-bank deals set to be announced in the next 30 days.

Depressed stock valuations leading to less-than-expected pricing for sellers, interest rate marks and uncertainty have contributed to the slowdown in bank M&A. However, the recent uptick in credit union-bank deal activity is partly due to buyers and sellers slowly resetting their expectations.

"It's taken a bit for everyone to reset expectations," McQueen said. "The compromise is starting to come through, and we're seeing people start to get a bit more focused on how to get a deal done."

On top of that, credit unions are much more actively engaged in bank sale processes than they have been in the past.

"There's no question that if a community bank seller is coming to market, that credit unions are more likely than not going to be included in the process," Cunningham said. "Credit unions will continue to be a part of the M&A environment, and we would envision them being a healthy portion of community bank M&A into the future."

Activity still down from record levels

Still, credit union-bank deal activity is depressed compared to prior years.

With just four deals almost halfway through the year so far, 2023 is on pace to have about half of the record of 16 deals that were announced in 2022. The total assets of targets involved in the deals this year is down as well at just $607.5 million, from the record of $5.70 billion last year.

The four deals announced this year are relatively small, with the total average assets of the four targets standing at just $151.9 million.

Geographic diversification

Credit union-bank deals have been largely concentrated in the Southeast and Midwest, but Nusenda FCU's acquisition of Western Heritage bank marked a geographic expansion for these deals. The bank is located in New Mexico and also has branches in Texas, both states that have never seen such a deal.

Meanwhile, the All In FCU-SunSouth deal places Alabama as one of four states with at least seven of these deals. Alabama is now tied with Georgia for third place for states with the most banks targeted by credit unions since 2015 with seven deals each, while Illinois ranks second with 11 deals and Florida retains the top spot with 15.

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4Front acquires UP bank

Press Release: Staff Reports 9.20.2023

TRAVERSE CITY — 4Front Credit Union acquired the locations and assets of Old Mission Bank based in Sault Ste. Marie.
The acquisition was announced Monday by the Traverse City-based credit union, after the two institutions reached a purchase agreement back in January. Terms of the transaction were not disclosed.

The acquisition of the Old Mission main office in Sault Ste. Marie and its Pickford branch will bring the number of 4Front locations across Northwest Michigan and the Eastern Upper Peninsula to 20, and grow 4Front’s assets to nearly $1.2 billion.

The two UP locations will operate as Old Mission, a Division of 4Front Credit Union.

“This strategic acquisition aligns with our mission of providing exceptional financial services and strengthens our commitment to supporting the financial success of our members and the communities we serve,” 4Front CEO Andy Kempf said in a media release announcing the transaction.

The deal is 4Front’s first bank acquisition, and the fourth credit union-bank transaction involving a Michigan-based bank since 2015, according to the S&P Global Market Intelligence website.

Old Mission Bank was founded in 2000. It reported $130.2 million in assets at the end of the third quarter in 2022, and posted a net income of $884,000 in 2021. It was assisted in the transaction by the Hovde Group, while 4Front was served by McQueen Financial Advisors.

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Credit unions to face stiffer competition for bank deals in 2024

Press Release: 1.3.24 | Lauren Seay & Ronamil Portes

Credit unions' appetite for bank deals won't wane in the new year, but those potential buyers are expected to face more hurdles.

In 2023, US credit unions announced 11 bank deals, three shy of the record 14 announcements in 2022. However, the slow pace of bank M&A led to credit unions making up a greater share of the buyers in 2023 bank deals, with the percentage increasing to a record high of 11.2%, up from just below 9% in 2022, according to S&P Global Market Intelligence data as of Jan. 2.

Deal advisers expect the interest to continue in 2024 as credit unions look to diversify through banks' commercial lending expertise, but they will face more impediments, such as stiffer competition from bank bidders and capital restraints.

Shifting landscape

US bank M&A slowed in 2023 as rising interest rates, a spurt of large failures and the tougher regulatory environment made deal agreements more difficult to reach. The lack of wherewithal for banks to pursue deals pushed potential sellers to contact credit unions.

Federal Reserve memo following a November 2023 meeting of the Community Depository Institutions Advisory Council noted that larger credit unions were "receiving an increase in inquiries from banks seeking to sell, primarily because other banks are unable to make acquisitions in the current environment." The memo added that credit unions with "ample liquidity and capital hold a distinct advantage, positioned as desirable" buyers of banks.

But of late the likelihood for banks to come off the dealmaking sidelines has increased thanks to changes in the interest rate outlook and a rally in bank stock prices. For those that are hungry for growth through M&A, the backdrop has become more conducive to pay up and win the deals they want.

"Community banks that wish to be active in M&A are stepping up to the plate and perhaps being a bit more aggressive with their pricing and recognizing that there's competitive landscape for some of these transactions," Greg Cunningham, senior vice president at Donnelly Penman & Partners, said in an interview. "They are taking a longer-term approach to their strategic endeavors, including M&A, and being very competitive in a lot of the processes that we've been involved in."

In addition, the recent industry focus on liquidity coupled with stiff deposit competition and high funding costs has credit unions being more frugal with their cash. As such, they are pickier about what deals they bid on as they can only pay cash since they are nonprofits and can't use stock in deals like publicly traded companies can.

"We're in a cycle where liquidity matters, and that does impact buyers," said Michael Bell, partner and co-leader of the financial institutions practice at Honigman LLP. "It's making buyers be a little more deliberate."

"It makes them more focused on process, on due diligence, on making sure everything kind of checks out, double, triple checks. It makes them more focused on the financial analysis and the models and making sure the models are conservative, making sure the models can be trusted," Bell added.

Credit unions are particularly conscious of their forward earnings and conserving capital for the potential downturn of consumer lending segments like auto and credit card.

"With the change of interest rates here and the spike up in deposit costs, margins are tighter, and so people are more nervous about their earnings going forward," Charley McQueen, president and CEO of McQueen Financial Advisors, said in an interview. "And then as we're starting to see, it's not bad, but we are obviously starting to see delinquencies increase in auto loans and credit card loans in different areas. And as that comes up, it does make people a little bit more defensive."

Not done yet

Despite those headwinds, credit unions are still on the prowl for bank deals. One of the major drivers for their appetite is acquiring commercial lending expertise. Historically, credit unions' products are more consumer focused, and bank acquisitions are a good way to break into commercial banking.

Credit unions are also interested in banks with attractive noninterest income businesses, like wealth management and trust services, Cunningham said.

Moreover, the recent bank failures are bolstering credit unions' desire to diversify through M&A after the turmoil of 2023 brought greater industry awareness to how concentration risks can contribute to a depository's downfall.

"If a buyer can diversify its loan or deposit portfolio, either geographically, either up and down the income spectrum, urban, rural, business, personal — all of those things make you safer and sounder," Bell said.

Geographic expansion

Advisers expect these deals will stay concentrated in Midwest and Southeast, and states where there are a lot of small banks left.

But both Bell and McQueen predict geographic expansion, with Bell suggesting up to five new states could see their first credit union-bank deals in 2024. McQueen predicts more activity in the Pacific Northwest.

 

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Blue Federal Credit Union, a federally chartered credit union headquartered in Cheyenne, Wyoming, successfully completed a private placement of $15.0 million of subordinated notes

Press Release: 12.21.23

On December 21, 2023, Blue Federal Credit Union, a federally chartered credit union headquartered in Cheyenne, Wyoming, successfully completed a private placement of $15.0 million of subordinated notes. The subordinated notes are intended to qualify as subordinated debt under NCUA rules and are considered regulatory capital in the calculation of Blue Federal Credit Union’s net worth ratio and risk-based capital ratio.

McQueen Financial Advisors served as the exclusive financial advisor.

Since January 1, 2022, newly effective NCUA rules have expanded credit union access to regulatory capital by permitting credit unions with at least $500 million in assets and new credit unions to issue subordinated debt. Low-income designated credit unions (regardless of their asset size) are also permitted to issue subordinated debt.

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Expected Fed rate cuts unlikely to reduce NIM pressure in 2024

Press Release: Alex Graf, Zuhaib Gull 12.27.2023

US banks are unlikely to see relief from compressed net interest margins before the end of 2024, even if the Federal Reserve cuts interest rates.

Net interest margins (NIMs) are a key bank profitability measure that weighs a company's interest income from credit products against the outgoing interest it pays depositors. The NIMs of US banks compressed over the last year as the Federal Reserve increased interest rates and competition for deposits intensified. If the Fed follows through on plans to cut rates in 2024, NIMs are unlikely to improve and may even shrink before 2025 due to high funding costs, which tend to lag rate moves, McQueen Financial Advisors President and CEO Charley McQueen said in an interview.

"That lag in deposit costs coming up really started to hit hard in the second half of 2023," McQueen said. "Nice yields on loans really popped up, and that will continue to improve asset yields, but I still think there's a little bit more of the deposit costs coming up right now."

Analysts predict further NIM compression in 2024

Analysts expect NIM compression for 16 of the 20 largest US banks in 2024 with a median decline for the group of 14 basis points, according to S&P Global Market Intelligence data. The group median of consensus estimates were 3.07% for 2023, 2.93% for 2024 and 2.98% for 2025, as of Dec. 18.

In contrast to analysts, bankers at some of the country's largest banks said they do not expect further NIM compression in 2024.

U.S. Bancorp has "great confidence" that its NIM will bottom out in the fourth quarter of 2023 and has the flexibility to reprice deposits as needed when the Fed cuts rates, CFO John Stern said during an industry conference in December. Huntington Bancshares Inc. expects a flat to rising NIM through 2024, CFO Zachary Wasserman said during the same conference.

Hedging for lower rates

Banks with excess funds can protect their NIMs by extending the duration on their investments and refraining from buying option-based investments, mortgage-backed securities or anything with negative convexity, McQueen said.

"That's going to allow us to keep our assets out there yielding a higher level in a downward rate environment," McQueen said.

Banks are increasingly selling low-yielding securities and reinvesting the proceeds into higher-yield securities to protect their margins. The industry recorded its highest level of realized losses on available-for-sale securities in three years during the third quarter as more banks repositioned their bond portfolios to improve their NIMs and other profitability measures. In the fourth quarter, several banks executed securities sales.

Hedging against falling rates is significantly more expensive now than it was just two months ago for asset-sensitive banks because the yield from converting floating secured overnight financing rate assets to fixed has declined by about 115 basis points in that time, said Isaac Wheeler, head of balance sheet strategy at Derivative Path.

"If you're a bank that's exposed in that way, you're not welcoming this move at all," Wheeler said in an interview. "It's actually no longer possible to hedge the first 150-basis-point move lower in rates because the market is already priced in."

Unlike asset-sensitive banks, the downward movement in swap rates and treasury yields has made hedging strategies cheaper for liability-sensitive banks, which have experienced substantial margin compression as the Fed has raised rates, Wheeler said.

"If you're an institution that's exposed to higher rates as a whole still, this is a nice entry point maybe to establish some funding hedges or even to swap fixed-rate investment securities to floating," Wheeler said.

Ultimately, the shape of the yield curve will be more important than the level of rates in terms of NIMs, Wheeler said. Banks would welcome rate cuts if they are accompanied by a significant steepening at the five-to-10-year part of the curve because the standard inversion of the last 18 months has put a lot of pressure on NIMs, Wheeler added.

On the lending side, banks should balance their loan books to make sure they have higher-yielding loans that will not refinance as soon as the Fed cuts rates, McQueen said.

Banks can also ladder short-term borrowings from the Federal Home Loan Bank, McQueen added.

"It's not a bad way at all to lock in some funding, although at an adjustable rate effectively," McQueen said. "If rates do come down as the world is predicting, we can definitely improve that cost of funds for that borrowing capacity."

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Credit union-bank deals face high termination rate

Press Release: Lauren Seay and Ronamil Portes 9.25.2023

Credit union acquisitions of banks have accelerated in the past decade, but not all of those deals make it across the
finish line.

Since 2011, credit unions have announced 91 bank acquisitions, but 14 of those, or over 15%, fell apart. During the same period, the rate is much lower for deals between two banks with just 3.8% of the more than 2,700 announcements being terminated.

Still, similar to traditional bank deals, some recent collapses have been the result of the macroeconomic environment in which interest rates have risen rapidly and distorted deal math, advisers said. Regulatory hurdles could also be the culprit for some terminations, as multiple advisers also noted that regulators' reviews of these deals have become more stringent.

"It's a little bit more difficult on the regulatory front," Charley McQueen, president and CEO of McQueen Financial Advisors, said in an interview. "They're all looking at the same thing and making sure it's the right thing to do and no one is going to be put in a bad position. No one wants to come out of a transaction and have a tough capital position or a bad earnings structure."

Capital and liquidity are major focuses for the regulatory agencies that have to approve these deals, which include both the National Credit Union Administration and the various relevant banking agencies, both federal and state.

One way a credit union can ensure its capital position is strong is through subordinated debt, but they should avail themselves of that funding before striking the deal, instead of after regulators raise issues, advisers said.

"You're a much more solid buyer by having something on your books ahead of time and a deal is not subject to you raising sub debt," McQueen said. VyStar CU raised $200 million in subordinated debt in 2022, the largest ever such raise by a credit union, as it waited for regulatory approval of its now-terminated acquisition of Heritage Southeast Bank. An analysis by S&P Global Market Intelligence in June 2022 found that the raise might have been done to help the pending transaction gain regulatory approval by ensuring Vystar CU's net worth ratio remained well above regulatory standards, but the deal eventually was terminated due to regulatory hurdles.

Regulators are also zeroed in on interest rate risk management.

"We're really seeing a higher level of scrutiny on overall interest risk management component of the transaction," McQueen said. "They really want to see the combined entity and the true risk that they have. I think a chunk of that is to really validate the forward earnings." A deal might also raise red flags if the two institutions are similar sizes, according to Tom Rudkin, DD&F Consulting Group Principal.

"If the credit union tries ... buying a bank that's one-third the size or higher, that will really attract a lot of scrutiny by the regulators to see if it really is going to make sense," Rudkin said.

Harvesters CU and First National Bank Northwest Florida announced their tie-up in August 2022, and the two companies were similar in size: Harvesters CU reported $274.5 million in total assets as of June 30, 2022, while First National Bank Northwest Florida reported $239.4 million as of the same date, according to S&P Global Market Intelligence data.

That deal fell through this year, and now First National Bank Northwest Florida is set to be acquired by Innovations Financial CU, which had $399.8 million in assets at June 30, compared to the bank's $169.2 million at the same date.

States stifle

At least four of the 15 deals that have fallen apart since 2011 are the result of state regulatory agencies not approving the deals. That was the case in Colorado, Nebraska, Iowa and Minnesota.

It is rare that federal regulators will shoot down a deal, but state agencies "can choose to be susceptible to politics and create issues," said Michael Bell, partner and co-leader of the financial institutions practice at Honigman LLP. The banking industry is largely against these deals, arguing that credit unions' tax-exempt status gives them an unfair advantage in M&A.

As such, it can be a risk to be the first credit union and bank to strike one of these deals in a state, advisers said. The key to avoiding this issue is to have an open dialogue with regulators.

"Pre-conversations [with regulators] have really improved," McQueen said. "There was an assumption that it would get approved before and now it's not just an assumption, it's validated ahead of time."

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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Credit union subordinated debt levels stall after years of rapid growth

Press Release: Lauren Seay and Zuhaib Gull 9.26.2023

Outstanding subordinated debt at US credit unions skidded to a near halt in the second quarter. The credit union industry had $3.65 billion in outstanding subordinated debt at June 30, up slightly from $3.61 billion in the first quarter. That was just a 0.9% increase quarter over quarter, a stark difference from at least 4% sequential growth every quarter since the second quarter of 2020.

Credit union subordinated debt levels have climbed every quarter since the beginning of 2020 when the industry began increasingly using the funding options as a means for growth. But now, as financial institutions focus less on growth and subordinated debt has grown more expensive due to higher interest rates, credit unions are holding off on new issuances.

"Obviously for banks and credit unions, it was extremely cheap a few years ago. But unfortunately, it's very expensive today," Charley McQueen, president and CEO of McQueen Financial Advisors, said in an interview. "It becomes very expensive just to sit on your books."

McQueen said he has seen a "substantial slowdown" in new inquiries about subordinated debt.

Credit unions with the most subordinated debt

Self-Help FCU and Self-Help CU topped the list of credit unions with the most outstanding subordinated debt in the second quarter with $409.0 million and $301.0 million, respectively. That made up the majority of both credit unions' total borrowings.

Subordinated debt has grown in popularity in recent years after a rule change by the National Credit Union Administration expanded the number
of credit unions that can access it.

The industry has also become more aware of the funding option. Historically, credit unions have largely relied on retained earnings to fuel growth given their limited funding sources compared to banks. But now, credit unions have increasingly utilized subordinated debt, which is one of the only options for growing capital outside of retained earnings, to fund both organic and inorganic growth.

Bank acquisitions are an attractive use for some credit unions. Among the top 20 credit unions with the most outstanding subordinated debt in the
second quarter, two have announced bank acquisitions since the start of 2022. Another two have announced acquisitions since 2021. One of those credit unions is Five Star CU, which had $50.0 million in subordinated debt at June 30, and struck two banks deals in one week last month.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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Steps Shared to Address Loan Mispricing

Press Release: Ray Birch 5.24.2023

CLAWSON, Mich.—The mispricing of loans by credit unions, particularly auto loans, could lead to some CUs facing earnings struggles in the near future, according to one analyst who is also recommending steps to address the issue.

Charley McQueen, president and CEO of McQueen Financial Advisors, agreed with others who have suggested too many credit unions were guilty of keeping auto loan rates far too low for far too long, not recognizing amid the short-term boost in volume how there would be a price to pay in the longer-term.

McQueen added he believes decisions made by many CFOs, many of whom are younger and who have not during their careers experienced an extended period of rising rates, are affecting investments and liquidity.

As CUToday.info has reported, consumers today have the opportunity to grab some of the highest returns on their deposits that they’ve seen in 15 years. Top-yielding online savings account rates are now just north of 5%, the highest since 2008, and much higher than last year’s 0.8%.

“All institutions are paying much higher rates on deposits right now, it's just not smaller institutions, and it's because people are spending more money than they make, just to get by—to buy groceries and things. They don’t have the money lying around in deposit accounts like they used to,” said McQueen, who noted draw down of personal savings is forcing financial institutions that had enjoyed record-levels of low-cost core deposits—to begin to pay up to maintain those funds and attract new deposits.

There are also consumers who are nervous about bank failures and what levels of deposits are insured, McQueen said.

“So, we see people who are reducing their exposure little bit. But most of our institutions have actually seen deposits increase or be flat over the past three months,” said McQueen.

Where credit unions have also not done well has been in tightening the loan spigot when necessary, said McQueen.

“They're having lots and lots of loan growth. When you have loan growth that reduces your cash position. And when you have a little deposit runoff it reduces your cash position,” he said. “Liquidity is at a premium. Credit unions should not have been putting all these loans (in the past year) on their books.”

One Particular Issue

As other analysts have also told CUToday.info, McQueen believes a particular issue has been credit unions underpricing their auto loan rates even as the Federal Reserve aggressively raised rates.

“Credit unions mispriced loans, especially auto. They kept them too low and now they're dealing with that and they have to make balance sheet adjustments,” continued McQueen. “Your balance sheet is not marked to market. What that does is produce a tougher earnings position. I think the next thing we’re going to see is credit unions struggling with earnings.”

Those earnings struggles will be a challenge for many, but McQueen does not believe they will lead to any failures, although he suspects it will sway some CUs to consider mergers.

“I do think there are a number of institutions that didn't properly prepare for the situation we're in and they're going to have a very difficult time with earnings and their balance sheet,” he said. “There's long-term, good balance sheet management strategies. And a lot of people have not paid attention to them. It was, ‘Hey, I don't want to stay short with my investments because I'm not making any money. I'm going to go longer.’”

In doing so, McQueen asserted, those CU executives lived for the short term, and disregarded the longer-term impact to the balance sheet.

“They reached for a yield and invested longer,” he said. “Now these investments they may have to sell to drive liquidity are a little bit underwater and that hurts them. You either sell the investments and take the losses, which is no fun, or you borrow money.”

Competition Remains Fierce

And is if all that weren’t challenging enough, the heated fight for deposits isn’t cooling, McQueen said.

“We're seeing six-month to one-year CDs at 5% and money market rates at 3.7% to 4%,” pointed out McQueen. “And this is not a small institution problem. American Express is paying nearly 5% on their money market accounts. Everyone's paying these higher rates right now to attract deposits.”

McQueen reminded that moves by the Federal Reserve, with its quantitative tightening, is also having an effect.

“We're shrinking money supply, which is pulling money out of the system and people are spending more money because of inflation,” he explained. “The combination of the two makes it tough when you just work with primarily individuals.”

How Credit Unions Should Respond

What do CUs need to do?

“You always, every day, have to do the basics—the blocking and tackling,” McQueen advised. “What that involves is writing loans at appropriate rates. Don't stop lending money, but you have to control the loan growth. You need to focus on your core membership. Many credit unions are doing indirect lending and looking to get loans from other places. But what they don't realize is they're not getting deposits anywhere except from their members. You need to balance out the deposits you're getting with the loans you’re getting from that membership base. If you're making loans to your core membership base, life is simple and easy.

“But if you decide that you want to do indirect lending, buy loans from the marketplace, or do something different, you then need to realize that you need to borrow funds to fund these indirect loans.”

In McQueen’s own review of the broader market data and where credit unions stand, he sees pricing minimums most CUs should be observing.

“If I'm going to borrow money from the Federal Home Loan Bank, let's just call it 5%, I've got to start with 5% (for the CU’s loan pricing). Then I've got to factor in my expenses. I also need to put in money for loan losses and CECL. And then, on top of that is my return—the ROI I need to have. So, when doing indirect lending or buying loans today, you're very quickly into the sevens, if not 8%—the lowest yield you should be booking.”

The Generation Gap

It’s advice in which a generation gap may be apparent, he added.

“Our company is dealing with a couple people who have had some problems, helping them work through them, and they are younger CFOs,” explained McQueen. “What I'm seeing many times is the CFO may not have as much negotiating experience dealing with people that have different interests. A great example is a CFO who bought a bunch of long-term, fixed 30-year mortgages over the past year. It was because a broker was telling him it's a good idea. I think a lot of these younger CFOs do not have the skill set or the knowledge to ask the right questions—such as is this really a good idea? What happens if rates go up? They just listen to people who have different motivations.

“Let’s use a used car salesman as an example, and I am just pointing to how people often perceive used car salesmen,” he continued. “But the used car salesman only gets paid if you buy that car. He couldn’t care less about what the payment is, how it affects you, how it affects your credit score, what happens to you in your life. All he wants is you to buy that car. And a lot of times bond salesman are the same way—there's good ones in this world and bad ones.”

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MFA has advised Arizona Federal Credit Union through the acquisition of Horizon Community Bank: 3.14.22

Press Release 3.14.2022:

McQueen Financial Advisors has advised Arizona Federal Credit Union through the acquisition of Horizon Community Bank.

Please click here to see more details.

Arizona Federal Credit Union has agreed to acquire the assets and assume the liabilities of Horizon Community Bank. The combined Company will have total assets of more than $3.3 billion; making it one of the largest credit unions in Arizona.

This transaction will mark McQueen’s 25th Credit Union – Bank Transaction; the most of any advisor in the United States.

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McQueen Financial Advisors is proud to announce that we are offering Foundation & Non-Profit Investment Management services

Press Release 4.20.2023:

McQueen Financial Advisors
1239 Anderson Rd, Clawson, MI 48017
(248) 548-8400
info@m-f-a.com

The Foundation & Non-Profit Investment Management area of MFA provides foundations, non-profits, and charities with professional investment portfolio management. Our Foundation & Non-Profit Investment Management team is prepared to manage your portfolio to fit your unique needs.
As a fiduciary manager, your best interest is always first. We have no conflict of interest with in-house products, inventory that needs to be sold, underwriting deals, brokerage, lending, or anything that is not solely focused on your best interest.

We are utilizing our twenty-four-year history (and our current investment management of nearly $14 billion) and expertise to provide Foundation & Non-Profit Investment Management services. We become part of your organization and meet with your investment committee and/or your board of directors on a quarterly, semi-annual basis to ensure we are achieving your objectives.

The Foundation & Non-Profit Investment Management services include:

  • Guidance on governance and investment policy design
  • Spending policy methodology and analysis
  • Review spending and investment policy alignment
  • Board Education
  • Setting long-term targets via strategic asset allocation
  • Portfolio review and analysis, including goals and objectives, target return, asset allocation, portfolio construction, investment manager selection, rebalancing, performance reporting, implementation, and/or execution.

“I founded the firm on the premise that each and every entity deserves personal attention focused on their unique needs. Our focus will always be on the needs of our clients.” -Charley McQueen President & CEO

For further information please contact:
Matt Brege
Advisor
(248) 548-8400
mattb@m-f-a.com

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Dare to be boring with your investments

Press Release: Bill Merrick 5.23.2023

Focus on the basics and manage for the uncertainty of outcomes.

If you do it right, investment portfolio management with an inverted yield curve will be perfectly boring, says Charley McQueen, president/CEO at McQueen Financial Advisors.

“It’s boring because we need to do the basics,” says McQueen, who addressed the 2023 CUNA Finance Council Conference Monday in Anaheim, Calif., with his colleague, Jim Craven, vice president and senior consultant.

“I think interest rates will start to come down in the next six to 12 months, so we’ll want to look for nonoption-based investments rather than mortgages or callable bonds,” McQueen says. “I want to look at fixed-term maturities and build a nice, boring ladder of securities three, four, or five years long. That way we’ll have constant maturities we’ll be able to reinvest in whatever market we’re in.”

He calls inverted yield curves—when long-term yields fall below short-term yields—“wonderful and painful because they usually tell us what's coming next.”

With an inverted yield curve, McQueen advises against investing in callable securities and mortgages.

“Nothing against them, but if you own mortgages in this environment and interest rates go up, the value of that investment goes down but the life of it extends,” he says. “I want my money back so I can reinvest at a higher level.”

He’s also not a fan of corporate bonds due to the prospects of a recession.

Good investment options in this environment include “really boring noncallable agency bonds, Treasury bonds, and municipal bonds,” McQueen says.

Regardless of what the future holds, it’s crucial to discuss scenarios with colleagues, even if you disagree. Craven, for example, believes the Federal Reserve will have to raise rates, while McQueen sees a rate cut coming.

“Who knows who’s right? It’s good to have dissenting opinions and to talk about them,” McQueen says. “It’s about managing for the uncertainty of outcomes, having a range of potential outcomes, and being prepared for them.”

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MFA advised on LLCU to acquire Nokomis Savings Bank

Press Release: Cayla Hittmeier 4.28.2023

Decatur, IL and Nokomis, IL, April 28, 2023 – Land of Lincoln Credit Union (“Land of Lincoln”) of Decatur, IL and Nokomis Savings Bank (“Nokomis”) of Nokomis, IL jointly announced today that they have entered into an agreement whereby Land of Lincoln will acquire Nokomis Savings Bank.

While the agreement is contingent on obtaining regulatory and member approvals, as required, the proposed transaction has been unanimously approved by the boards of directors of both institutions. The transaction is expected to close by the end of the first quarter of 2024. When the acquisition is complete, Land of Lincoln will have approximately $482 million in assets and increase its footprint into Montgomery County, Illinois, and the surrounding areas with a total of 15 branches.

Robert Ares, President & CEO of Land of Lincoln stated, “We are excited for the opportunity to partner with Nokomis Savings Bank and expand access to our service in Montgomery County and other contiguous market areas. This acquisition is part of Land of Lincoln’s strategic growth plan, which includes adding branches and markets to better assist our members throughout Illinois. Nokomis Savings Bank’s customers will become members of Land of Lincoln with full access to our wide array of products and services. We look forward to welcoming Nokomis Savings Bank’s customers and employees into our family.”

Charles O’Malley, President of Nokomis commented, “We are delighted for the opportunity to join Land of Lincoln and believe this partnership will result in many benefits to our customers, employees, and community. We look forward to working with Land of Lincoln to see this exciting transaction through to closing.”

About Land of Lincoln Credit Union
With approximately $457 million in assets, over 120 employees, 14 branches, and over 34,000 members, Land of Lincoln Credit Union offers a full menu of financial services including mortgages, auto loans, checking accounts and business loans and deposits. Land of Lincoln Credit Union remains dedicated to putting members first. More information about Land of Lincoln Credit Union can be found at www.llcu.org.

About Nokomis Savings Bank
Nokomis Savings Bank, a full-service community bank, has approximately $27 million in total assets, $21 million in deposits and $11 million in loans. With one location serving the West Central Illinois community, Nokomis Savings Bank has been providing exceptional customer service and high-quality products for over 100 years. More information about Nokomis Savings Bank can be found at www.nokomissavings.com.

Contact Information
Land of Lincoln Credit Union
Robert Ares President & Chief Executive Officer
844-222-7788
Nokomis Savings Bank
Charles O'Malley
President & Chief Executive Officer
217-563-7711

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