Bank’s Woes Pose CU Opportunity In Unprecedented Branch Deal

EAU CLAIRE, Wis. – Financial problems faced by one bank in this state played right into the hand of Royal CU, which agreed to acquire 11 branches from troubled AnchorBank as part of its growth strategy.
Charles Grossklaus, president of the $1 billion credit union, said the deal meshed with the credit union’s plans to significantly expand into western Wisconsin. “It is an opportunity of a lifetime,” Grossklaus told The Credit Union Journal yesterday. “We get 11 profitable branches. And we are getting them below their appraised value—at book value. Anchor unfortunately has to build capital, and you build capital by reducing your assets.”
The deal also allows Anchor, under a June supervisory order by the Office of Thrift Supervision, to reduce operating expenses and boost capital. The supervisory order also required the Madison, Wis.-based bank to bring in a new CEO, Chris Bauer, who had been CEO of Firststar Bank in Milwaukee.
The $5 billion bank reported a loss of $72 million for its fiscal second quarter ending Sept. 30 and a loss of $135 million for the first two quarters of its fiscal year.
"This transaction with RCU allows AnchorBank to make significant progress toward our goal of increasing our capital ratios in order to continue to address the challenges we're facing in this economic climate," said Bauer.
The deal continues the effort which has included the closure of three banks, reduction of 10% of staff and suspension of employee 401(k) contributions in recent months.
Grossklaus would not disclose the cost of the deal, but banking industry sources indicate the branches cost around $18 million. Royal will also assume $177 million in deposits and a proportionate amount in loans, real estate, and other assets. It will purchase nine of the offices and assume the lease on the other two.
Royal will retain all 114 AnchorBank employees who work at the acquired locations. The 25,000 customers from the 11 Anchor offices will become credit union members.
The acquisition will raise the credit union’s assets to $1.3 billion, members to 143,000, and branches to 26.