In the first deal of its kind, insurance giant Nationwide Financial Services announced it is starting up its own bank by acquiring its employees credit union, Nationwide FCU.
The rare deal is being structured as a merger with Nationwide Bank, a de novo bank chartered recently by the insurance giant acquiring the $570-million credit unions, the largest credit union in Central Ohio.
But unlike the recent conversions of credit unions to banks, members of the 55-year-old credit union will receive payment for their equity, $79 million, a 25% premium to the $63.3 million in net worth the credit union had at the end of the first quarter.
The pro rate payments will amount to $150 for every $1,000 a member has deposited with the credit union.
In a similar deal, in 2001 the Aid Association for Lutherans, in Appleton, Wisc., merged two credit unions that it sponsored, AAL Member CU and AAL CU, into its existing trust company, AAL Trust Co., and paid members of the two credit unions a total of $15.5 million in a liquidating dividend. But that was a merger with an existing institution and not a de novo bank, like the Nationwide proposal.
In contrast to the conversion with the more controversial credit union-to-bank deals of late, Eric Hardgrove a spokesman for Nationwide Financial said, "We're working very closely with the credit union leadership. It's very important, as it should be, that we make sure that the members are the ones benefiting here."
In addition, the credit union, virtually a single sponsor (it has a few select groups located within its offices) is as closely tied to its sponsor as any other similar credit union.
