The deal, in the works since July and closely watched by both industries as a harbinger of possible future sales by other stressed banks, allows the state's fifth largest credit union an expanded footprint stretching across western Wisconsin to metro areas of Minnesota's Twin Cities.
Under the transaction, subject to regulatory approval, Royal will acquire the properties, $177 million in deposits, loans, real estate and other assets, said a statement. The CU, located in the west central part of the state, is also adding 114 new employees, said CEO Charles Grossklaus. Terms were not disclosed.
Regulators said the transaction is by far the largest of its kind in years and underscores the continuing effects of the recession on financial institutions, with banks in many parts of the country taking the brunt of the negative fallout. The number of bank failures has climbed past 123.
Calling his purchase "an outstanding deal for us," Grossklaus maintained "the real news is that for the first time we will be introducing a credit union into communities that have only known banking services and that seems a pretty strong plus for credit unions."
He was referring to a handful of western Wisconsin communities that formerly housed offices of a now-merged and former family-run bank, S&C Bank of New Richmond, which itself was merged two years ago by the $4.7 billion Anchor, the state's largest thrift and once known as Anchor Savings & Loan.
Since then, Anchor has fallen on hard times and been under regulatory supervision following large losses in its commercial portfolio, and on that score, the bank's management has acknowledged its need to find new capital, shrink assets and reduce expenses.
Grossklaus, a former chairman of the National Association State of Credit Union Supervisors and the Wisconsin Credit Union League, forecast the buy out of the branches will take 18 months to complete.
Knowing Anchor was under financial stress, Grossklaus said he approached its management several months ago about selling the branches. Grossklaus said Royal, with 9.76% capital and 0.53% ROA, is well-positioned to handle the transaction and has been one of the Midwest CUs frequently solicited by the NCUA to join the bidding for troubled credit unions in the sand states.
"I think we get called once a month by NCUA and in my 38 years I don't ever remember that happening," said Grossklaus who said his credit union will now have its hands full undertaking the daunting task of completing the Anchor conversion.
Once finished, Royal will have 26 branches, 23 across central and western Wisconsin and three in the Twin Cities metro area, serving more than 140,000 members. "Let me also say we are acquiring profitable branches in the transaction," Grossklaus added. Royal's move is part of its five-year plan. The Anchor deal permits, he said, expansion of the credit union's commercial loan portfolio.
Regarding the sale, AnchorBank Chief Executive Chris Bauer in a statement said the Royal buyout of the 11 branches, two of which were leased, would help bring the bank in compliance with an Office of Thrift Supervision supervisory agreement that calls for higher capital ratios and expense reduction.
All of the 11 branches being bought by Royal are located within 100 miles of Eau Claire.
"The entire transaction gives us a great opportunity to expand along the entire I-94 corridor," said a spokeswoman, referring to the interstate which cuts across the state from Chicago to the Twin Cities.