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Valley Strong agrees to merger with smaller credit union in Bay Area

Valley Strong Credit Union would take a big step toward its ambitious growth goals with a proposal it announced Tuesday to merge with a much smaller, financially weaker credit union based in the Bay Area.

Joining with Fairfield's Solano First Federal Credit Union would allow Bakersfield-based Valley Strong to enter its third new market to the north since launching a rebranding and expansion campaign early last year.

The merger, if approved by regulators and the membership of Solano First, would shore up Solano First's finances while pooling resources in a way likely to benefit both organizations' members over time. It's the second such agreement for Valley Strong and perhaps not the last as the industry continues to consolidate.

Valley Strong's name is expected to be applied across the combined organization by the end of this year.


Valley Strong's executive vice president and CFO, Nick Ambrosini, who is slated to become CEO July 1, said in a news release the proposal puts members first.

“After several months of working side by side to analyze the value of partnering with Solano First, the Valley Strong Board of Directors and I feel that combining our two organizations allows us to further our mission of helping people and communities prosper,” he stated.

Added Mike Warrell, Solano First's president and CEO: “Merging with Valley Strong allows us to provide enhanced capabilities, more robust products and service offerings, and other significant benefits to our members, our team members and the communities we serve."


Federal records show Solano First has about $175 million in total assets and is by that measure about one-twelfth Valley Strong's size. The Fairfield-based organization has about 9,900 members, or about one-seventeenth as many as its proposed partner.

Solano First launched in 1956 and now has three offices, while Valley Strong was founded in 1940 and has 18, including the Tulare and Visalia locations it opened last year.

The two institutions' financial conditions contrast as well. Valley Strong is considered well-capitalized with a 9.2 percent net worth-to-total assets ratio at the end of last year. Solano First's capital ratio of about 4.6 percent in late December was significantly below the 6 percent considered financially healthy.


Their trajectories also vary. The Bakersfield-based credit union's loan portfolio was down less than 1 percent year over year in December and its net income was up almost 12 percent. But during the same period, Solano First saw its loans shrink by more than 3 percent while its net income dropped about 85 percent.

Increased financial efficiencies expected to result from the deal would be more valuable to Solano First than they would be to Valley Strong, said Matt Wrye, senior communications manager at the California Credit Union League.

"Basically it's going to improve Solano First," he said, while having a minimal effect on Valley Strong's finances.


Where the larger credit union's members would see the most benefit, he added, is in the combined organizations' ability to leverage additional resources that could be used to enhance the customer experience.

"I would hope that (Valley Strong's members) would see that that means better efficiencies in products and services for them," Wrye said.

The merger would also bring Valley Strong closer to its goal of accumulating $3 billion in total assets by 2025. It reported its total at $2.2 billion on Dec. 31.


Valley Strong's executive leadership, insisting the credit union must grow to survive, said in early 2020 it had approached several credit unions about potentially merging but that no deals were struck. It said at the time it would only agree to a merger if it leaves Valley Strong in the driver's seat.

When it was still known as Kern Schools Federal Credit Union, Valley Strong agreed in 2013 to merge with Tehachapi Federal Credit Union, which then had fewer than 400 members and a worrisome capital ratio of 2.2 percent. KSCFU's leadership said at the time the deal was a value in part because of the quality of Tehachapi Federal's membership base.


Credit unions have undergone a dramatic consolidation in recent decades even as their membership base has grown.

Last fall there were 5,240 credit unions active across the United States, a 61 percent decline from 30 years ago.

During the same period, the number of members they serve has jumped 105 percent to reach a combined membership of about 125 million.

Editor's note: This story has been corrected to reflect that Valley Strong members will not be asked to approve the merger.