Minnesota Department of Commerce rejects CU-bank merger

The Minnesota Bankers Association says the Minnesota Department of Commerce’s rejection of a proposed merger between Royal Credit Union and Lake Area Bank provides needed clarity on the legality of such transactions within the state. 

In rejecting the proposal for the Eau Claire, Wis.-based credit union to purchase the Lindstrom-based bank, the Department of Commerce found that in Minnesota, “a state-chartered bank is not authorized to transfer its assets and liabilities to a credit union for the purpose of consolidating or merging out of existence,” according to the MBA. 

 Minnesota’s Commerce Department is the sixth state bank regulator to find that state statutes do not allow state banks to transfer their assets and liabilities to a credit union. State regulators in Colorado, Iowa, Tennessee, Mississippi and Nebraska have said the same. “Because some regulators have approved these deals and other regulators have not, the MBA has been looking for clarity on whether these transactions are lawful for Minnesota state-chartered banks,” the MBA stated. “We believe it is important for bank owners to understand the rules. The action by the department provides that clarity, for this specific type of potential transaction.”

 MBA Executive Director Joe Witt did not take a stance on whether MBA agrees with the state statute. He said the MBA is instead focused on following existing guidance to ensure banks have the clarity needed before they hire accountants, attorneys and other professionals to handle an often expensive, time-consuming M&A.

 Independent Community Bankers of Minnesota President/CEO Jim Amundson said though the ICBM remains opposed in principle to tax-exempt credit unions purchasing community banks, the rejection of the private Lake Area Bank-Royal Credit Union merger was not a result of any lobbying from his organization.

 Royal Credit Union announced Aug. 12 that it had entered into a definitive agreement to purchase the $423.5 million Lake Area Bank. The acquisition was intended to offer Royal the chance to enhance office accessibility to its current Minnesota membership, as well as serve additional members in the region. Royal Credit Union President/CEO Brandon Riechers declined to extensively comment on the proposed merger on April 4. “We have restructured the original transaction and are currently under a binding purchase agreement,” he said. “We will announce additional details at the appropriate time.” 

Lake Area Bank was established in 1915 in Lindstrom. It is privately owned and insured by the FDIC. Today, the bank also has offices in Forest Lake, Hugo, Stillwater and White Bear Lake. Royal Credit Union has expanded over the last six years. The credit union already plans to merge with Medford, Wis.-based Peoples Choice Credit Union. In 2016, Royal expanded to the Minnesota market through the acquisition of Deerwood Bank in Apple Valley and Capital Bank in Saint Paul.