- Provide benefits to our current and future members;
- Allow for further innovation and growth; and
- Help achieve continued strength and sustainability for the future of our credit union.
The vote originally planned for March 19th was postponed to support the local and national efforts to reduce the spread of COVID-19. Voting will now occur over a period of three days from June 23to 25, 2020. This vote is made possible by new orders recently introduced by the Government of Manitoba under The Emergency Measures Act, which temporarily allows credit unions to conduct member meetings and voting via telephone, electronic, or other virtual communication facilities. The Special Meeting of Members will be held via teleconference at 7:00 p.m. CDT on June 25th where the results of this important vote will be announced.
The Credit Union environment has changed significantly over the past number of years. We anticipate that our members’ technology expectations will continue to grow and remain as diverse as the multi-generations we serve. With these increasing costs associated with technology, regulation, higher tax burdens, and an increasing requirement for specialized talents, credit unions that can’t meet these challenges are finding it difficult to maintain a competitive place in the market.
Over the last 5 years, the number of credit unions in Manitoba has decreased from 38 to 23. In fact, there were 65 credit unions in Manitoba in the year 2000. This decreasing trend in total number of credit unions continues both in Manitoba and across Canada. Credit unions have been merging to remain relevant and strong for the future.
The business case, dated February 11, 2020, and the addendum to the business case, dated May 15, 2020, have also been shared and reviewed by our provincial regulators: Deposit Guarantee Corporation of Manitoba and Financial Institutions Regulation Branch of the Province of Manitoba.
The in-depth assessments completed by both Credit Unions as part of initial business case development determined that the proposed merger will create a strong financial foundation upon which a new entity may grow. Updated financial models do not change these conclusions. The substantial economies of scale, asset growth, enhanced capital base, improved gross operating margin, profitability, and cost efficiencies realized with the proposed amalgamation remain the optimal strategic approach for long-term viability.
In fact, the current and potential future impacts of the COVID-19 pandemic have further strengthened the importance of this merger for the future of our combined credit unions and the anticipated benefits for members. The proposed merger will position the new credit union for more success than either credit union could achieve independently.
As part of the due diligence and business case, detailed financial analysis and modeling was completed. In the table below, we have provided some high level results from the updated five year financial projections of the new proposed credit union.
The financial projections anticipate that the new credit union would grow to $6.9 billion in total assets and would achieve approximately $45 million of Gross Operating Profit (GOP) by the end of Year 5, GOP being defined as income from operations before provision for loan losses, patronage and income taxes. The GOP is anticipated to increase annually from Year 1 to Year 5 as a result of the benefits and strength from the overall scale of the new organization, including but not limited to greater achieved revenues and continued realized costs efficiencies.
High Level Financial Forecasts
Cautionary statements relating to forward looking information:
The financial projections constitute “forward-looking statements” which are based upon current assumptions of future events which may not prove to be accurate. Such “forward-looking statements” reflect management’s current views with respect to certain future events and financial performance and include any statement that does not directly relate to any historical or current fact. Words such as “anticipate,” “estimate,” “forecast,” “projection” and similar expressions which indicate future events and trends may identify “forward-looking statements.”
Given the longer term nature of these projections, they are subject to greater uncertainty, including potential material impacts if the assumptions are not realized. Such statements are based on currently available information and are subject to various risks and uncertainties that could cause actual results to differ materially from those projected or implied in the “forward-looking statements” and from historical trends. The foregoing projections are based on information available as of the date of the business case and reliance on the foregoing financial projections is subject to the assumptions and risks determined as part of the due diligence.
Factors that could cause actual results to differ materially from those projected or implied in any “forward-looking statement” and from historical trends include, but are not limited to economic conditions, changes in regulation, government actions, actions by our competitors, and other risks inherent to the industry in which we operate.
The initial plan is for the two districts to be defined as the North district which is the area within the City of Winnipeg perimeter highway, as well as any area in Manitoba North of highway #1 and any areas outside of the Province of Manitoba; and the South district which is the area South of the City of Winnipeg perimeter highway as well as South of highway #1.
Only those members of the Credit Union who are assigned to a specific district may be nominated for election for that district. Similarly, only those members of the Credit Union who are assigned to a specific district will be entitled to vote for Directors for that district.
It is the Board’s responsibility to outline the talent needs of the Board covering skills, experience, knowledge and attributes required to be an effective governing body for the Credit Union. The role of the nominations committee is to review all applications to determine the best representation on the Board, seeking candidates to complement existing Board skillsets.
- Future fixed costs per legacy credit union will be paid once by the new credit union resulting in immediate savings (e.g., implementation costs for technologies);
- Reduced costs with volume discounts due to the size and scale of the new credit union;
- Maximizing the talent from both organizations and reducing the need for each credit union to invest separately in the required specialized skill sets; and
- Eliminating redundant services and duplicated processes resulting in more savings and efficiencies.
- incompatible company cultures;
- inability to successfully implement all the merger initiatives;
- perceived loss of identity and ability to influence; and
- unrealized financial and non-financial benefits.