First of America Agrees to Buy Illinois Thrift

First of America Bank Corp. of Michigan said Tuesday it has agreed to acquire the fifth-largest thrift in Illinois for about $100 million in cash.

The acquisition of Champion Federal Savings and Loan Association would give First of America the largest Illinois operations of any out-of-state bank, with $6.3 billion in assets and 103 branches. Champion is a profitable but capital-deficient thrift with $2.3 billion in assets and 31 branches.

|Stuck to Their Knitting'

"This greatly enhances our presence in Illinois," said Richard Klein, vice chairman of Kalamazoo-based First of America, one of the most highly regarded banking companies in the country. "They're profitable and have stuck to their knitting. We chose them over many."

Shares of First of America rose $1 to $30.50 on Tuesday.

Merger activity has been heating up in Illinois since last year, as out-of-state banks have been scooping up banks and weak thrifts. Banc One Corp. recently agreed to buy Marine Corp. and First Illinois Corp., while Detroit's NBD Bancorp announced that it was acquiring FNW Bancorp.

And ABM-Amro Holdings of Amsterdam has announced plans to acquire Talman Federal Savings and Loan, one of Chicago's largest thrifts.

"The state just screams for consolidation," said Henry C. Dickson, banking analyst at Kemper Securities.

Conversion Coming

First of America, with $14.1 billion in assets, said it will acquire Champion's stock for $100 million to $110 million after the Bloomington-based thrift converts from mutual to stock form of ownership. An official said the conversion will be overseen by the Office of Thrift Supervision, which has already signed off on the deal.

Analysts said the deal made strategic sense for both institutions. "It gives them a large branch presence and a larger distribution network," Mr. Dickson said.

Champion has been working to address its capital deficiency since the passage of the thrift law, which disallowed the use of goodwill as capital. Champion had a tangible-capital-to-assets ratio of negative 0.48% as of March 31, according to Sheshunoff Information Services.

"We had to take care of our capital deficiency, and it gives us a chance to go with a strong institution," said Craig Hart, Champion's chief executive officer.

Mr. Hart said First of America's offer made sense, given the search for capital and Champion's strengths in community lending and traditional mortgage lending. He stressed that the thrift does not purchase brokered funds, out-of-state loans, or high-yield "junk" bonds. Mr. Hart said the thrift has earned around $7 million so far this year.

The deal clearly strengthens First of America's Illinois market share, but also brings the well-regarded superregional closer to the Chicago market. With a presence in the northern and southeastern suburbs, the transaction adds the western flank of Chicago to the First of America portfolio.

Champion has a branch network in Dupage county, one of the fastest-growing suburban markets. Ultimately, the bank will likely enter the city limits, said Mr. Klein of First of America.

"The suburban markets are just as lucrative, but certainly we have an interest in Chicago proper," he said.

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