DALLAS-Town North Bank, which has marketed its credit card business as credit union-owned, has agreed to sell its $300-million portfolio of credit union loans to Elan Financial Services, a unit of U.S. Bancorp, the parent of U.S. Bank.
The reason for the sale, explained John Reap, president and CEO of Town North Bank, is to reduce assets and generate capital in a move to offset losses from the bank's investment portfolio in 2008. Town North reported a $5-million loss for the first quarter of 2009, after eking out a $81,000 net for fiscal 2008.
As a result of the deal, Elan, which operates one of the biggest agent-issuing cards businesses, will be the issuing partner for 168 credit unions. Elan has partnered with credit unions for nearly 40 years and has agent issuing relationships with more than 350 credit unions.
Financial terms of the deal were not disclosed.
TNB has aggregated and successfully grown the agent issuing portfolio since 2002 by purchasing the portfolios of credit unions and managing those portfolios on the credit unions' behalf. At the end of the first quarter it had a total of $487 million of credit card loans.
Full transition of the agent accounts from Town North Bank Nevada to Elan is expected to be complete in November. TNB Card Services will provide interim servicing as the agent accounts are transitioned to Elan. Town North Bank Nevada will also continue to be the issuer for a multi-million-dollar credit card portfolio on behalf of Town North Bank's customers. This will enable TNB Card Services to continue to share portfolio management expertise with its processing clients to help them successfully compete in today's marketplace.
