Frequently Asked Questions
Please see below a list of Frequently Asked Questions regarding the potential merger with Access Credit Union.
Both credit unions were actively reviewing options to position themselves for a stronger future. In 2016, CCCU board and management had developed a five-year vision and strategic plan, including a goal to explore a merger opportunity. This goal was further described by indicating that the right partnership must:
- 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.
We believe we have found the right partner in Access Credit Union and, as a result, we began discussions in Spring 2019.
Both credit unions were actively reviewing options to position themselves for a stronger future. The right partnership must:
- 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.
With the completion of the business case and due diligence review, both Crosstown Civic and Access have concluded that the proposed partnership is in the best interests of their members, employees, and communities. The vote originally planned for March 19th was postponed to support the local and national efforts to reduce the spread of COVID-19. Both credit union partners maintained connections throughout the emergency, providing assistance to each other. As part of good governance, both credit unions completed a review of any new potential impacts that could result from the pandemic. This additional review concluded that there were no significant new risks that could not be overcome with mitigation measures. In fact, the new credit union would be in a stronger position to address the potential impacts and risks and reinforces the benefits of the proposed merger. An addendum to the original business case was shared with the Board of Directors for their review and approval. As a result, both credit union Boards have recently signed an updated Amalgamation Agreement with an effective amalgamation date of January 1, 2021 and are inviting the respective memberships to vote on the merger proposal. 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.
As the COVID-19 pandemic continues, companies need to continue to conduct normal business virtually to meet the necessary health orders while maximizing engagement with members. The vote originally planned for March 19th 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. These provisions enable both Crosstown Civic Credit Union and Access Credit Union to maximize member participation in this important merger vote while ensuring the health and safety of both members and staff through social distancing.
On November 27th, we announced that we were in discussions with Access Credit Union about a potential merger. We shared these discussions early to allow an opportunity to engage our members and employees throughout this process. A dedicated website was created to host information regarding these merger discussions (cusuccess.ca). In addition, members were invited to participate in an online survey and attend two Member Forums, one held on January 30th and the other on March 2nd.
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.
Given the importance of this decision for our credit union, the boards wanted to provide a method that would increase member engagement for the vote. By providing electronic voting from 8:30 a.m. CDT on June 23 to 6:00 p.m. CDT on June 25, more members will be able to be part of the decision. Any members requiring assistance with electronic voting can get help from employees at any branch during regular business hours during the June 23 to 25 time period. For the safety of members and employees, we will be following the latest public health orders and ensuring physical distancing between individuals at all times. All branches are equipped with protective shields and voting tablets will be sanitized after each use.
Both credit union Boards have recently signed an updated Amalgamation Agreement with an effective amalgamation date of January 1, 2021. To obtain a copy of the Amalgamation Agreement, please contact your local branch or the Member Solutions Centre at 204-942-1277.
In choosing a name, both credit unions considered several options, including choosing one of the two existing names or creating a new name. After much discussion, both boards identified the strength of the Access name and its applicability to the missions of both organizations. Both credit unions believe in providing opportunities for all members to achieve their financial goals by delivering accessible services that best meet those needs.
The plan is to develop a refreshed brand with the Access name, a brand that reflects both credit unions, demonstrating the beginning of a new organization while respecting the legacies of our pasts.
Access is a relatively new name, having originated in 2009 with the merger of four credit unions in Southern Manitoba. The name is appealing to the greater population and one that many can associate with. Members will have access to financial products and services as well as financial literacy tools and expert advice. Employees will have access to fulfilling careers, education opportunities, and comprehensive training and development programs.
As a true merger of equals, the board of the new credit union will be comprised of ten board members, five from each credit union. In addition, the two boards agreed that each credit union will have representation at the leadership levels—both on the board and senior management team. As such, Ingrid Loewen, current Board Chair for Crosstown Civic, was selected as the Chair of the new Board and Curt Letkeman, current Board Chair for Access, will be the Vice Chair.
Both credit unions are fortunate to have two very strong leaders. Mona Forsen, the CEO of Crosstown Civic, had previously informed the board of her intentions to retire in 2020. Larry Davey, current President and CEO of Access Credit Union, has accepted the role of President and CEO for the new organization. Larry has over 30 years of experience in the financial services industry with 25 of those years in the credit union system.
The members of the Credit Union shall be grouped into two (2) districts, with each district represented by an equal number of directors, which is five (5) from each credit union as per the Amalgamation Agreement.
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.
The Board of Directors role is to represent the members and, on behalf of the members, they have conducted extensive due diligence leading up to the business case for the proposed merger and have thoroughly reviewed and discussed with management the business case results, which included the financial projections. Additional due diligence was completed as a result of the pandemic and an addendum to the business case with updated financial projections was provided and reviewed.
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.
|BALANCE SHEET||Opening||Year 1||Year 2||Year 3||Year 4||Year 5|
|INCOME STATEMENT||Opening||Year 1||Year 2||Year 3||Year 4||Year 5|
|Financial Margin & Other Income||$91.0M||$92.6M||$97.6M||$102.9M||$108.3M||$114.1M|
|Total Operating Expenses||$58.3M||$61.4M||$62.9M||$64.9M||$67.0M||$69.1M|
|Gross Operating Profit||$32.7M||$31.2M||$34.7M||$38.0M||$41.3M||$45.0M|
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.
One of the many favourable things about this merger is the absence of geographic overlap in the combined branch network. No branches will close as a result of this proposed merger. Crosstown Civic hosts nine branches in Winnipeg and Access has seventeen branches in southern Manitoba.
The new entity will also maintain the two current corporate offices of the legacy credit unions: one located in Winnipeg and one located between Winkler and Morden. Organizations today can work from many locations with the help of technology. This will allow staff to work at various locations without the need to relocate.
There will be some merger and integration costs, most of which will be one-time costs that will include application to the competition bureau, legal, and systems integration. Because our two credit unions are on many similar systems, such as our core banking system and loan origination system, there will be less cost to integrate the systems. The implementation will also be easier for staff as they are familiar with the systems and there will be less disruption to members.
These costs will be short term and the new combined credit union will experience large savings over the years that results in positive financial benefit to reinvest in our members, employees, and the community. Some examples of savings include:
- 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.
Every decision our business makes has at least some risk. Some common risks identified with a merger would include:
- 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.
No matter what path an organization decides to take, there is always some level of risk. By choosing to not do anything different, there is as much if not more risk, than choosing to do something that has the opportunity to improve things and provide benefits to all. As part of the due diligence, the respective Boards of Directors and management teams have identified and reviewed the risks and concluded that there are no areas of insurmountable concern, risk, or cost in a merged entity versus continuing as separate entities. For each risk, strategies and plans have been identified to mitigate and/or eliminate the risks.
We are proud of the fact that Crosstown Civic has paid patronage to our members since 1992. However, in order to remain competitive and relevant, we have experienced compressed margins and increased expenses in technology and people, as well as increased costs with changes in regulations and corporate taxes. This has challenged us to be able to pay patronage at the same levels that we have in the past.
Both credit unions agreed that the new credit union will focus on maximizing the ability to pay patronage to members as part of the cooperative values and belief that members should share in our profits. We believe the new credit union will be able to offer an enhanced patronage program with the objective of paying bonuses in cash to members. In addition, we believe the new credit union will have the financial capacity to pay out existing CCCU surplus shares in cash over a five-year period.
AcceleRate Financial is currently a division of Crosstown Civic Credit Union, offering virtual deposit products and services since 2010. The new entity will have the capacity to make further investments to benefit our current and future AcceleRate Financial members. Both boards quickly agreed that the new credit union will maintain the AcceleRate Financial name. Similar to the Access name, the brand for AcceleRate Financial will be refreshed to demonstrate the beginning of a new organization.
Converting to a new banking system is a major system change and impacts nearly every aspect of the credit union’s operations. With both CCCU and Access on the same banking system, a merger integration of the two systems will be less disruptive for members. As with all change, we will communicate regularly and work hard to minimize the potential impact to our members.
If the merger proceeds, it will be our goal to limit any member impact and make the merger transition as seamless as possible. Both credit union’s benefit from being on the same banking system which will make integration much simpler. We will be transparent with members and will communicate with you through this process.