The $317 million Five Star Credit Union in Dothan, Ala., signed an agreement Wednesday to purchase the $47 million Farmers State Bank in Lumpkin, Ga., the cooperative's second bank purchase in less than a year.
Though Five Star CU would not disclose financial terms of the deal, its President/CEO Bob Steensma, said "we got a nice deal on it" because Farmers State Bank was facing financial challenges and had been up for sale for a while.
In May 2014, federal regulators approved Five Star's first bank acquisition of the $21 million Flint River National Bank in Camilla, Ga.
Farmers State Bank, which serves about 2,800 customers, posted a year-to-date ROA of -0.74%, and a ROE of -20.20%, according to its financial performance reports filed with the FDIC. Since 2010, the bank recorded substantial declines in its real estate, commercial, agricultural and individual loan portfolio as well as net income losses, according to financial performance reports.
Nevertheless, Steensma said he is excited about the new purchase, the first publicly announced credit union acquisition of a bank in 2015.
Farmers State operates three branches, two in Stewart County and one in Quitman County in rural Southwest Georgia.
"There was no way we could build three offices for the price that we paid for the bank," Steensma said. "It wouldn't even have come close."
The acquisition will allow Five Star CU to expand its mission to serve low-income members and the underserved, he added.
"These two counties (Stewart and Quitman) are very much low income and underserved and they are very similar to our existing membership base," Steensma said. "So, it is a fit from that standpoint."
Moreover, Steensma said Five Star CU would be the only financial institution serving these two counties, if approved by federal and state regulators, including the NCUA and FDIC. The credit union estimated the regulatory process might take three to six months. Shareholders of Farmers State Bank also must approve the acquisition.
Five Star CU is applying for community charters with the Georgia Department of Banking and Finance so that the 2,800 customers of Farmers State Bank can automatically become members of the credit union. Five Star CU already has a community charter to serve Quitman County.
If the community charters and acquisition are approved, Five Star CU's branch network will increase to 16, up from its current 13 branch offices that serve more than 29,000 members in Alabama and Georgia.
Steensma said he expects most of the bank's customers will become members of the credit union in part, because the cooperative will be able to offer them more products and services such as mobile banking and a credit card program that Farmers State Bank does not offer its customers. The bank's employees are also expected to be retained by Five Star CU once the regulatory approvals are finalized.
The credit union's acquisition of Flint River National Bank has shown to be a positive investment so far. From June to December 2014, Five Star grew deposits at the former bank branch by 41% and increased membership by 11%, according to Steensma.
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