Avadian Credit Union to Buy Alabama Bank
The $606 million Avadian Credit Union in Birmingham, Ala. has signed an agreement to buy the financially struggling American Bank of Huntsville, Ala., according to an Aug. 24 letter to the shareholders of the bank’s parent company, ABH Bancorp Inc.
On Aug. 20, the board of directors of the American Bank of Huntsville authorized its management to enter into a purchase and assumption agreement with Avadian Credit Union, which changed its name from Alabama Telco Credit Union in January.
Under the terms of the agreement, Avadian Credit Union will buy for an undisclosed sum all of the bank’s assets including its employees and facilities, and substantially assume all of its liabilities.
The transaction is expected to close by the end of this year pending all state and federal regulatory approvals.
This is the third publicly announced credit union purchase of a bank in 2015.
The first transaction was announced in February by the $329 million Five Star Credit Union in Dothan, Ala., which signed an agreement to purchase the $47 million Farmers State Bank in Lumpkin, Ga. The second deal was announced in May when the $1.1 billion Achieva Credit Union in Dunedin, Fla. agreed to purchase the $166 million Calusa Bank in Punta Gorda, Fla.
American Bank of Huntsville, which manages $126 million in assets, lost $295,000 at the end of Q1 2015. Its return on assets was -0.94%, while its return on equity was -11.13%, according to financial statements posted on the FDIC’s website.
In its letter to shareholders, the board for the American Bank of Huntsville said funds from the purchase will be used to retire debt and return about $2 per share to shareholders of ABH Bancorp. The shareholders’ letter also stated some of the benefits of the transactions would eliminate operational risk stemming from continued losses at the bank and eliminate certain regulatory cost burdens.
Linda Cencula (pictured above), president/CEO of Avadian Credit Union, said the benefits and growth opportunities far outweigh the financial challenges of American Bank of Huntsville.
“The [financial] condition is based on [the bank’s] situation with its regulatory body and once that is out of the picture I think the opportunity for growth will far transcend any challenges the bank has had over the past couple of years,” Cencula said. “I think it gives both organizations the opportunity to blend the expertise and the strengths of the two very different organizations into one very strong, solid financial institution.”
The bank’s 4,000 customers will be automatically eligible for credit union membership.
Although Cencula plans to continue operating the sole office/branch of American Bank of Huntsville, she would not say whether all of its 30 employees will remain employed with Avadian Credit Union.
“I never want to overpromise and under deliver, as I have told their staff, but we will review every employee, their current skill set, their job, their function and figure out how best to meld the two,” she said. “We’ve got some gaps as well and I think we can supplement some of our gaps with some of their talent and expertise.”
Avadian Credit Union has about 185 employees.
The bank deal will increase the credit union’s branch network from 17 to 18 and may potentially increase Avadian’s current membership of 70,316 to 74,000.