KleinBank in Chaska, Minn., has agreed to sell three branches to Wings Financial Credit Union in Apple Valley, Minn.

The $4.5 billion-asset credit union will buy branches in the Minnesota communities of Coon Rapids, Otsego and Plymouth. Wings did not disclose the price of the deal, which is expected to close in the second quarter.

Under the deal, 4,500 KleinBank customers would automatically become Wings members, said Frank Weidner, the credit union's president and CEO. Those customers would bring roughly $40 million in deposits and $10 million in loans to Wings.

KleinBank is selling three branches to a Minnesota credit union. Adobe Stock

“When the transaction closes and those customers are brought into the Wings membership, they are going to see some very significant benefits in rates,” Weidner said. “Higher deposit rates, lower loan rates going forward and a much lower fee structure as well.”

The $1.8 billion-asset KleinBank decided to sell the branches to because they were not adjacent to the bank’s market and Wings was interested in expanding. The branches will serve 6,000 Wings members in the northwest Twin Cities region.

Wings was a “good partner” because the institutions offer comparable financial services and the credit union already has a consumer-focused reputation in the Twin Cities market, said Doug Hile, KleinBank's president and CEO.

KleinBank, which will still operate 18 branches in the southwest metro area, made the deal during a year of strong performance and plans to reinvest the sale’s proceeds into the bank. KleinBank has had increased earnings consecutively for the last eight years, Hile said. In 2017, the bank had around a 1% return on assets and almost a 10% return on equity.

The acquisition brings Wings' total branch presence to 20 locations in the Twin Cities.

KleinBank employees will be trained on Wings systems before the deal is closed, said John Wagner, the credit union's senior vice president of member experience. Since the branches will likely be twice as busy as they were before the deal, Wings plans to review staffing.

“It’s going to be a learning process,” Wagner said.

Whole-bank and branch purchases are the best available nonorganic-growth tools for credit unions, said Michael Bell, a lawyer at Howard & Howard who specializes in mergers and frequently works with credit unions.

Minnesota and Wisconsin are active states for credit unions buying banks, and Bell is working on six possible deals in that area. In 2016, he helped Royal Credit Union buy a branch in the Twin Cities area.

“The professionals that advise banks have realized that credit unions are great partners,” Bell said.

Wings had a record 2017 in revenue as well as membership growth and loan growth. It brought in more than 25,000 new members.

The branch deal “is going to help us continue to perform exceptionally,” Weidner said.

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