Update: UFCU Purchase of Indiana Bank Now Complete

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In a landmark ruling, the FDIC last week gave approval to a credit union-bank deal by which the $1.3billion United Federal Credit Union of St. Joseph, Mich., can buythe ailing the $80 million Griffith Savings Bank of Indiana,according to attorneys representing UFCU.

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The transaction had already won NCUA approval.

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Management of the Michigan CU previously hailed the merger as anindustry breakthrough in opening the doors for troubled thrifts orperhaps even community banks to legally become absorbed by healthyCUs.

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The key to the transaction is that CUs can purchase the assetsof the ailing thrift rather than take on the charter, which wouldbe prohibited, explained CU lawyers. Griffith has agreed to shed aportion of its assets to conform with NCUA field of membershipregulations as they apply to UFCU, officials said.

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Michael Bell, a Niles, Mich., attorney representing the KotzSangster firm of Detroit, credited Gary Easterling, president/CEO of UFCU “with coming up with theidea and after looking at the concept, understanding it had neverbeen done before, we asked ourselves a rhetorical question, whynot?”

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In addition to safety and soundness issues, Easterling also saw“two great hurdles or barriers to such transactions–FOM and thesecond being impermissible assets or investments,” said Bell.

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The plan was to make the bank's current customersmembers of the credit union. He added that “impermissible assets orinvestments are a bit easier to deal with as you can take advantageof a short time window allowed by the NCUA regulations to divest ofthem after the transaction.” 

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