Wings Financial Credit Union, Apple Valley, Minn., expects to close a deal to purchase three branches of Chaska, Minn.-based KleinBank during the second quarter of this year, the $4.5 billion-asset credit union announced Thursday.
The branches are in Coon Rapids, Otsego and Plymouth, Minn. The transaction requires regulatory approval from the National Credit Union Administration, Federal Deposit Insurance Corporation and the Minnesota Department of Commerce.
As part of the deal, 4,500 KleinBank customers will automatically become members of the credit union, according to Wings Financial CU President and CEO Frank Weidner. Those customers will bring roughly $40 million in deposits and $10 million in loans to the credit union.
“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 chose to sell the branches to Wings Financial CU because they were not adjacent to the bank’s market and the credit union was interested in expanding its footprint. The branches will serve 6,000 Wings Financial members in the northwest Twin Cities region.
According to KleinBank President and CEO Doug Hile, Wings Financial CU was a “good partner” because the two institutions offered comparable financial services and the CU already has a consumer-focused reputation in the Twin Cities market.
KleinBank, which will continue to 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. The bank has had increased earnings consecutively for the last eight years, Hile said. In 2017, the bank had around a 1 percent return on assets and almost a 10 percent return on equity.
The acquisition brings Wings Financial’s total branch presence to 20 locations in the Twin Cities.
KleinBank employees will be trained on Wings Financial CU systems before the deal is closed, said John Wagner, SVP of member experience for the credit union. Since the branches will likely be twice as busy as they were before the deal, WFCU plans to review staffing at the new branches, as well as at existing Wings Financial branches nearby.
“It’s going to be a learning process,” Wagner said.
According to Michael Bell, an attorney for Royal Oak, Mich.-based Howard & Howard, a law firm that specializes in mergers and frequently works with credit unions, whole-bank and bank branch purchases are the best available nonorganic-growth tools available for CUs. Both Minnesota and Wisconsin are active states for credit unions acquiring banks, and Bell is currently working on six possible transactions in that area. In 2016, Bell helped Royal Credit Union purchase a bank office in the Twin Cities area.
“The professionals that advise banks have realized that credit unions are great partners,” Bell said.
In 2017, Wings Financial CU had a record year in revenue, membership and loans, including bringing in 30,000 new members.
“This is going to help us continue to perform exceptionally,” Weidner said.