That precedent-setting deal by Michigan’s United Federal Credit Union to merge an ailing Indiana savings bank gained NCUA approval last week and now seems certain to be the model for more to come, its architect says.
“Given the aftermath of the recession, we know this is trail blazing and others are looking,” UFCU President/CEO Gary Easterling said after the NCUA last week cleared the deal announced in July for the $1.3 billion St. Joseph, Mich., CU to consolidate the $80 million Griffith Savings Bank in Griffith, Ind.
Easterling said he now expects FDIC approval by the end of the year. He said he believes the process may have been delayed by the transition of the Office of Thrift Supervision into the Comptroller of the Currency.
The deal would be the first federal credit union takeover of thrift, but avoids any legal barriers on CUs acquiring bank charters because “it is only the assets that are involved,” Easterling said.
He said that under the transaction terms, the Griffith Bank has already shed some of its loans and “we’re working on the membership details to ensure loans we take over comply with NCUA.”
He said the amount of loans being spun off by Griffith “is really only a small part of the transaction, roughly 5%,” he said.
The Griffith bank – which had become overextended on real estate loans –is in northern Indiana, between UFCU’s hometown on Lake Michigan and Chicago, thus fits into the 106,000-member UFCC’s operational planning, Easterling said.
The “bursting of the housing bubble” still leaves many banks looking for buyers, he said. And on that healthy credit unions stand to gain, he said.
“We believe and we’ve already heard of more opportunities like this for credit unions as some of those ailing thrifts look for buyers, either other banks or credit unions,” Easterling said.