Royal Credit Union in Eau Claire, Wis., has agreed to buy Capital Bank in St. Paul, Minn., from First Sleepy Eye Bancorp in Sioux Falls, S.D.

The $1.7 billion-asset Royal said in a letter to Capital customers that it has also agreed to assume $35 million in assets in a deal that should close in the second half of this year. The price was not disclosed.

First Sleepy Eye will retain its ownership stakes in two other banks with branches in Minnesota, Iowa, and North Dakota.

“Our core ideology, built on a strong purpose and a solid set of values, led us to the decision to move forward with the agreement to acquire Capital,” Rudy Pereira, Royal’s president and chief executive, said in the letter.

Pereira said in the letter that Royal plans to transfer members it already serves in St. Paul to Capital Bank’s branch once the deal closes.

“We are excited to share the benefits of a credit union with you,” Pereira said. “Of course we offer all the products and services you’d expect to find at a financial institution, but our business model makes us unique. Credit unions are not-for-profit financial cooperatives and are owned by their Members. As a result of this model, earnings are returned to our members in the form of lower loan rates, high interest on deposits, and lower fees. Sound good?”

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