EAU CLAIRE, Wis.-Royal CU, the fifth largest credit union in the state, has reached over the border to Minnesota and merged with troubled REAL Financial CU.
The move, which was given special approval by NCUA and the respective state regulators, was spurred by the financial difficulties REAL Financial, which serves employees of firms affiliated with the Minnesota and Western Wisconsin Realtors associations, encountered over the last two years.
REAL has about $2.5 million in unpaid loans outstanding since 2006 as many of its members have fallen on hard times stemming to the troubled real estate market. The $30-million CU has examining potential mergers for years, but as an acquirer, not an acquiree.
"We've been very open to the concept because of the economies of scale and we wanted the services for the members. We just took a different route to get there," said REAL CEO Dean Wickstrom. "We maybe could have survived, but we were playing with fire. If we failed, the regulators would have determined our future; we didn't want to take that chance."
A number of other credit unions, including several based in Minnesota, offered to merge with REAL, Wickstrom said it opted for Royal's bid because it perceived RCU as a business savvy CU run with the touch of a much smaller institution.
"These guys have a business acumen that we felt that was higher than most of the others and yet they are truly genuine credit union people," he said. "They care about their members, they care about their staff."
RCU CEO Charlie Grossklaus said REAL Financial CU has strong loan underwriting policies in place and operations are strong, but the institution was left vulnerable because its members were all from one segment of the economy.
After hearing from a Realtor in Minnesota about REAL's troubles, Grossklaus offered to help the struggling credit union, but after a few visits the two sides concluded that a merger would be beneficial for both sides.
RCU is no stranger to mergers, having merged with Whitehall CU, Rice Lake CU and Colby CU within the last 25 years. After the mergers, the three credit unions saw a combined members growth of approximately 300% and assets between the three skyrocketed by 500%.
The new combined credit union, after absorbing REAL's $30-million in assets and 7,500 members, will serve more than 120,000 members and control more than $1 billion. Grossklaus plans to take advantage of the newly expanded charter that gives the combined institution a community charter in 12 counties in the Twin Cities, which will be served by three REAL branches.
"We'll get involved very quickly with marketing to the Realtors to both states and after that we'll look into expansion into the 12 counties," he said. "It has to be controlled growth. We're not going to throw a whole bunch of darts out there."
Integration should take about six to nine months, but in short order RCU will be offering REAL members a new line of products and services and RCU members will be able to use REAL's 30 Minneapolis-St. Paul area shared financial centers by the second half of the year.
Following integration, a new name for the merged entity will be selected - a decision Grossklaus believes needs to be set aside for later but requires diligent thought when the time comes. "We want to do that right and we have not come up with the right name yet, it's going to take time," he said. "RCU is an important trademark in this area and is very well received. People in this market know who RCU is and we don't want to lose that either."
