For nearly three years after it changed charters on Sept. 1, 2001, Allied First Bank of Naperville, Ill., used essentially the same strategy it had as a credit union.
Founded in 1994 to serve American Airlines pilots, Allied expanded its customer base slightly after its conversion by targeting other airlines' pilots.
That strategy appeared sound before 9/11, when most pilots could count on job security and a six-figure salary. Since then, however, chaos has engulfed the commercial airline industry.
So in the past eight months the $145 million-asset Allied has done two line-of-business deals that have reduced its reliance on the airline business: In October it bought the mortgage lending unit of Chicago's Burling Bank, and in April it bought Eagle's Nest Marketing, a Naperville firm that provides call center support to small banks and credit unions around the country. (It did not disclose the prices.)
Eagle's Nest has added considerably to Allied First's fee income - $188,432 in the third quarter - but Allied president and chief executive Kenneth L. Bertrand said he believes the acquisition of Burling's mortgage lending unit can be a transforming event.
In the Oct. 6 press release announcing the completion of the purchase, Mr. Bertrand said the Aurora, Ill., unit would improve Allied First's mortgage origination capability and, more important, its ability to serve the surrounding community. (He did not return phone calls seeking comment for this article.)
"This purchase really strengthens Allied First Bank as a whole," Mr. Bertrand said. "Burling's local client base" will allow Allied "to be a major presence in the Kendall, Kane, and DuPage county markets."
He did not say if any new branches were in the works, but even by itself, the purchase of the unit from the $113 million-asset Burling represents a major change for Allied First.
Throughout its 10-year history, first as a credit union and bank, Allied has focused on online banking and other remote-access technologies. It has no branches outside Naperville, and at midyear it controlled less than 1% of the $30 billion deposit market in Kendall, Kane, and DuPage counties.
Naperville and Aurora are both in DuPage County.
Allied First has no plans to abandon its roots. Indeed, it plans to market its mortgage products through Eagle's Nest and the 24-hour call center Eagle's Nest operates.
Allied First has never lost money catering to airline pilots, but it has not earned a whole lot, either.
It recorded a record profit of $1.12 million in its 2004 fiscal year, which ended June 30, but $636,000 of that came from the sale of its credit card portfolio. It earned $387,000 in fiscal 2003 and $531,000 in fiscal 2002.
In its 2003 10-K report, Allied First said that the combination of terrorism, the Iraq war, and the runup in oil prices had "adversely affected" pilots at American and other airlines.
