Marking a threshold in bank-credit union transactions, the $1billion Royal Credit Union of Eau Claire, Wis., is buying assets,liabilities and 11 branches from a troubled thrift, AnchorBank ofMadison.
The deal, in the works since July and closely watched by bothindustries as a harbinger of possible future sales by otherstressed banks, allows the state's fifth largest credit union anexpanded footprint stretching across western Wisconsin to metroareas of Minnesota's Twin Cities.
Under the transaction, subject to regulatory approval, Royal willacquire the properties, $177 million in deposits, loans, realestate and other assets, said a statement. The CU, located in thewest 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 kindin years and underscores the continuing effects of the recession onfinancial institutions, with banks in many parts of the countrytaking the brunt of the negative fallout. The number of bankfailures has climbed past 123.
Calling his purchase “an outstanding deal for us,” Grossklausmaintained “the real news is that for the first time we will beintroducing a credit union into communities that have only knownbanking services and that seems a pretty strong plus for creditunions.”
He was referring to a handful of western Wisconsin communities thatformerly housed offices of a now-merged and former family-run bank,S&C Bank of New Richmond, which itself was merged two years agoby the $4.7 billion Anchor, the state's largest thrift and onceknown as Anchor Savings & Loan.
Since then, Anchor has fallen on hard times and been underregulatory supervision following large losses in its commercialportfolio, and on that score, the bank's management hasacknowledged its need to find new capital, shrink assets and reduceexpenses.
Grossklaus, a former chairman of the National Association State ofCredit Union Supervisors and the Wisconsin Credit Union League,forecast the buy out of the branches will take 18 months tocomplete.
Knowing Anchor was under financial stress, Grossklaus said heapproached its management several months ago about selling thebranches. Grossklaus said Royal, with 9.76% capital and 0.53% ROA,is well-positioned to handle the transaction and has been one ofthe Midwest CUs frequently solicited by the NCUA to join thebidding for troubled credit unions in the sand states.
“I think we get called once a month by NCUA and in my 38 years Idon't ever remember that happening,” said Grossklaus who said hiscredit union will now have its hands full undertaking the dauntingtask of completing the Anchor conversion.
Once finished, Royal will have 26 branches, 23 across central andwestern Wisconsin and three in the Twin Cities metro area, servingmore than 140,000 members. “Let me also say we are acquiringprofitable branches in the transaction,” Grossklaus added. Royal'smove is part of its five-year plan. The Anchor deal permits, hesaid, expansion of the credit union's commercial loanportfolio.
Regarding the sale, AnchorBank Chief Executive Chris Bauer in astatement said the Royal buyout of the 11 branches, two of whichwere leased, would help bring the bank in compliance with an Officeof Thrift Supervision supervisory agreement that calls for highercapital ratios and expense reduction.
All of the 11 branches being bought by Royal are located within 100miles of Eau Claire.
“The entire transaction gives us a great opportunity to expandalong the entire I-94 corridor,” said a spokeswoman, referring tothe interstate which cuts across the state from Chicago to the TwinCities.
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