Second Illinois Bank Buy Announced by Credit Union
Corporate America Family CU plans to acquire Ben Franklin Bank of Illinois, which has been under regulatory scrutiny.
For the second time in a month, a credit union announced plans to buy an Illinois bank.
The $616 million Corporate America Family Credit Union in Elgin said Tuesday it signed an agreement to acquire the $93 million Ben Franklin Bank of Illinois in Arlington Heights.
The 126-year-old financial institution has been under regulatory scrutiny since 2012 and earlier this year signed an agreement with the Office of the Comptroller of the Currency to assure the safety and soundness of the bank
Under the terms of the purchase and assumption agreement, Ben Franklin Financial shareholders are currently estimated to receive between $10.33 and $10.70 in cash for each share for the OTC common stock of Ben Franklin Financial Inc., the bank’s holding company.
The transaction is the third credit union bank acquisition in the Land of Lincoln. Last month, the $961 million Verve, a Credit Union in Oshkosh, Wis. announced plans to buy the $295 million South Central Bank in Chicago. Last year, the $1.8 billion Advia Credit Union in Parchment Mich. bought the $149.9 million Golden Eagle Community Bank in Woodstock, Ill. That transaction was finalized Monday, Advia CU said.
BFBI employs 26 staff members and operates a branch in Arlington Heights with a market share of 1.69% and a second branch in Rolling Meadows with a market share of 2.83%, according to the bank’s 2018 annual report.
At the end of the first quarter of this year, the bank posted deposits of $73.9 million, a net loss of $82,000 and an ROA of – 0.35%. At the end of first quarter of 2018, BFBI recorded deposits of $86.3 million, a net loss of $90,000 and an ROA of -0.36%, according to the FDIC. The bank manages capital of $10.2 million.
In 2012 and 2015, the OCC issued two consent orders against the bank that specializes in commercial lending, according to the regulator’s records.
In February, the OCC terminated the 2015 consent order and replaced it with an agreement with the bank, which noted that the regulator found “unsafe and unsound practices including those relating to operating the bank with deficient earnings.”
Under that agreement, BFBI’s board of directors agreed to establish a compliance committee, a strategic plan, and a capital plan.
The 2012 consent order required BFBI to maintain a capital level of at least 9% and a total risk-based capital ratio of 13%. The order also required the bank to address a number of areas such as protecting its criticized assets, implementing a program for the bank’s credit and collateral exceptions, establishing an independent loan review and a comprehensive liquidity risk management policy, developing a strategic plan and mandating that the board hire competent and effective executives and appoint two independent directors.
The 2015 consent order, which designated BFBI in “troubled condition,” required the bank to maintain a capital level of 8% and a risk-based capital ratio of 12%, implement a strategic plan and submit quarterly progress reports to the OCC.
The bank’s board hired an investment banking firm in 2017 to develop strategies to comply with the capital requirements in the OCC consent order. The board decided to raise capital through a private stock offering. In 2018, the bank sold 600,000 shares of its common stock that raised $4.5 million.
“The board of directors realize that it will take a significant amount of time for us to accomplish our growth objective consistent with the successful implementation of our strategic plan” according to BFBI’s 2018 annual report. “The Company deregistered with the SEC in January 2018, which reduced our operating costs beginning in 2018.”
In its annual report, BFBI noted that it faces “intense competition” within its Chicago suburban market areas in making loans and attracting deposits.
Nevertheless, CAFCU said in a prepared statement that it is “eager” to acquire the community bank.
“We are looking forward to the acquisition of Ben Franklin Bank and feel this will be an excellent opportunity to provide even more individuals with the products and services CAFCU offers in furthering financial goals and dreams.” Peter Paulson, CAFCU president/CEO, said in a prepared statement.
Both BFBI branches will continue to operate under CAFCU’s brand after the transaction is finalized.
CAFCU employs 207 staff members and operates 20 branches that serve a membership of 66,810.
The proposed acquisition has been unanimously approved by the board of directors of each party and is expected to close in early 2020, subject to customary closing conditions, the approval of Ben Franklin Financial stockholders, regulatory approvals, and if required, the approval of the depositors of Ben Franklin Bank.
This transaction will be the first time that a federal mutual holding company that converted to a stock holding company following the implementation of the Dodd-Frank Act will have its assets and liabilities sold to a credit union, according to a prepared statement that announced the proposed deal.