Wall Street Sees Profits from Main Street’s Credit Unions

WALL STREET – Investment bankers and their clients are fattening up on the growing number of credit unions converting to banks. Wall Street firms, like Keefe Bruyette & Woods, Friedman Billings Ramsay and Sandler O’Neill, among others have earned millions of dollars in fees, dividends and stock profits by juicing the profit machine that has become credit union conversions, according to documents filed with the Securities and Exchange Commission. KBF, for example, earned almost $1.2 million when it underwrote October’s initial public offering for ViewPoint Bank, the former Community CU, and stands to earn a similar amount when it brings an IPO for OmniAmerican Bank, formerly OmniAmerican CU, to market next year. FBR, has underwritten several of the stock offerings of converted credit unions, earning almost $1.5 million in the May 2005 IPO of Atlantic Coast Bancorp, once Atlantic Coast FCU. Sandler O’Neill, which is earning fees by helping to convert credit unions, has also earned millions of dollars in profits on the stocks of converted credit unions, SEC records show. The company, which has holdings in hundreds of financial companies, recently sold 100,000 shares in Heritage Bank of the South, formerly AGE FCU, for $1.7 million, earning a profit of more than 50% in less than a year on the ex-credit union that just went public in May 2005. Sandler O’Neill also made double-digit returns on the recent sale of 90,300 share in K-Fed Bancorp, formerly Kaiser FCU. The investment bank still holds large stakes in First PacTrust Bancorp, once Pacific Trust FCU, 98,100 shares valued at $2.8 million; and Rainier Pacific Bancorp, formerly Rainier Pacific CU, 80,000 shares valued at $1.6 million. That doesn’t include dividends earned on those shares, like the 17 cent-a-share fourth-quarter payout for First PacTrust, amounting to $16,700 on Sandler O’Neill’s shares.