Michigan CU joins bank-buying trend

Advia Credit Union is set to complete its acquisition of Wisconsin-based Peoples Bank later this year, joining an increasing flow of bank-credit union deals.

Advia Credit Union, headquartered in Parchment, Mich., is scheduled to complete its acquisition of Peoples Bank in the third quarter of this year.

Peoples, founded in 2001 in Elkhorn, Wis., has four offices in the southeastern part of the state. This acquisition will not only double the number of locations Advia has in Wisconsin but also double the number of potential members in the state. The details of the cash-only transaction were not disclosed.

This purchase represents the fourteenth purchase of a bank by a credit union. Attorney Michael Bell has been involved in all fourteen and says a fifteenth will be announced shortly.

Michael Bell
Michael Bell

With increased regulation squeezing bank profit margins, many small bank owners are looking to sell. Bell says there are advantages in selling to a credit union. “The deal costs for the bank being acquired are usually less with a credit union purchaser,” Bell said. And sometimes a bank purchase is easier on the side of the credit union because it’s just business. “Credit union to credit union transactions often involve emotional issues involving volunteer board seats, name changes and the like. Acquiring banks offer credit unions a purely business transaction.”

Why would credit unions be interested in buying banks and expanding their market? “Just like any other financial institution, scale is needed for efficiency. Additionally expansion helps the cooperative movement,” Bell said. And this kind of cross-charter transaction continues to gain in popularity. Bell spends 90 percent of his time on these types of deals and says there are more than 10 additional transactions in the works.

Banks looking to sell to a credit union don’t need to fit any type of specific profile.”There aren’t specific features that make a bank a likely acquisition except they have to be willing to sell for 100 percent cash.  Cash is the only currency CUs have; they have no stock to give,” Bell said.

Bank owners, while cautious about credit unions as competition, are becoming less shy in having a credit union be an acquirer of their bank. Bell sees no negatives in this for the bank owners. “By involving a CU bidder, one of two things will happen. One: the credit union wins. Two: the credit union raises the ultimate sale price. I don’t see any negatives with either.”

Advia, which has $1.3 billion in assets, just completed its acquisition of Mid America Bank in Janesville, Wis., in August 2016. When this transaction closes, Advia will be the second credit union to acquire two banks. The other was Five Star Credit Union based in Alabama which acquired banks in Georgia.

Advia also has plans to build a branch in Madison, Wis., this year. It already has one location in Illinois and 18 offices in Michigan.

“We are thrilled to have the opportunity to welcome the customers of Peoples Bank as members of Advia Credit Union,” said Cheryl DeBoer, Advia president and CEO.

“We are pleased with the proposed transaction and we believe Peoples Bank’s customers, employees, communities and shareholders will all benefit,” added Tom Oehler, president and CEO of Peoples Bank. “Advia is a strong financial institution that has the size, resources, and commitment necessary to competitively meet the financial needs not only of our consumer clients but also our commercial, agricultural, municipal, and non-profit customers now and in the foreseeable future.”