Regulators Approve Indiana's First Credit Union Merger With a Bank

Indiana regulators approved what is believed to be the state’s first consolidation of a credit union into a bank.

To facilitate the consolidation, the Department of Financial Institutions in Indianapolis on Friday first approved the application of the $18.7 million Adams County Farm Bureau Cooperative in Monroe to convert from a state-chartered credit union into a state-chartered mutual savings bank. Immediately after that application was approved, Indiana regulators also approved the application of the $702 million First Bank of Berne for the credit union to consolidate into the Berne-based bank.

The credit union’s state-chartered conversion application made the subsequent bank merger application legal under Indiana law, but it is not the only way that a bank can acquire a credit union, according to Kirk J. Schreiber, senior depository analyst and Lyndsay Miller, acting deputy director of the Indiana Department of Financial Institutions.

“I’ve been doing applications for 25 years and it’s the first one that I have had to deal with,” Schreiber said.

The merger agreement was initially announced by both financial institutions in October 2019.

Max Beer, who chaired the credit union’s board of directors, said in a prepared statement the “increased cost of regulatory compliance has made it difficult to continue and would impact our ability to deliver service at the level our members expect and deserve.” When considering options to provide continued service for its 1,108 members, Beer said the credit union reached out to the First Bank of Berne.

Beer did not say in the prepared statement whether the cooperative, founded in 1946, reached out to other credit unions for a possible consolidation.

This is the second bank acquisition of a credit union in nine months.

In April, the $318 million Alliance Bank Central Texas in Waco completed its purchase the $6.1 million Texas Farm Bureau Federal Credit Union, also based in Waco, which was founded in 1956 and served 772 members.

Last January, the credit union board agreed in a resolution to sell its assets to the bank, saying it was in the “best interest of the credit union and its members.”

After Texas Farm Bureau FCU’s membership approved a voluntary liquidation, it did not require the NCUA’s approval, according to John Fairbanks, spokesperson for the independent federal agency.

The bank acquired approximately $3.4 million in loans managed by the credit union, which represented a substantial portion of its assets, according to an FCC application. Alliance Bank Central Texas, however, did not assume any of the member deposits, which amounted to about $2 million at the end of the first quarter of 2019, according to NCUA financial performance reports. The credit union also managed $849,757 in investments at the end of the first quarter.

The credit union’s sole branch is continuing to operate as Alliance Bank Central Texas, representing its first bank-at-work branch in the Texas Farm Bureau headquarters.