Published in Finance

Indiana credit union eyes additional Michigan expansion after New Buffalo deal

BY Sunday, June 21, 2020 04:28pm

NEW BUFFALO — The largest credit union in Indiana looks to further expand in the Michigan market after acquiring the parent company of New Buffalo Savings Bank.

The deal gave South Bend-based Teachers Credit Union three offices in Berrien County to go with a branch it opened in 2003 in Niles to serve the Michiana market and customers living and working on either side of the state line.

Teachers Credit Union President and CEO Paul Marsh COURTESY PHOTO

Teachers Credit Union President and CEO Paul Marsh said his organization was actively looking to extend its footprint and had considered a couple of deals when the opportunity arose to acquire New Bancorp Inc., New Buffalo Savings Bank’s holding company. The deal offers a “great fit” culturally and geographically for TCU, which aims to reach further into the state, Marsh said.

“This is just a natural progression for us into Michigan,” he said. “I see expansion farther into Michigan.”

TCU looks to grow strategically into contiguous states: Michigan, Ohio, Kentucky and maybe Illinois, plus further across Indiana, Marsh said. He views TCU “as a Midwest powerhouse and we just continue expanding our footprint.”

Future market entries in Michigan for TCU could include the Grand Rapids and Kalamazoo areas, he said.

While TCU does not have specific targets for Michigan, Marsh wants to double the credit union’s overall footprint within 10 years. Michigan ultimately could account for one-third to 40 percent of the credit union’s overall business, he said.

“I see it being a healthy part of our business,” Marsh said. “I see some real opportunities.”

TCU has some heft to pursue that ambitious growth goal, with 57 offices total — 54 of which are in Indiana — and nearly 301,000 members.

At the end of the first quarter, TCU had $3.38 billion in total assets, an increase of more than 18 percent from a year earlier, according to a quarterly financial report filed with the National Credit Union Administration. Total deposits as of March 30 were $2.86 billion, up 4.3 percent from the same period in 2019, and total loans stood at $2.69 billion.

TCU recorded $4.2 million in net income for the first quarter and $24.2 million for all of 2019.

By comparison, the largest credit union based in Michigan is Lake Michigan Credit Union in Grand Rapids, which at the end of the first quarter had $7.42 billion in total assets and more than 381,000 members, followed by Dearborn-based DFCU Financial Credit Union with $5.14 billion in assets and 230,000 members, according to NCUA data. East Lansing-based Michigan State University Federal Credit Union ranks as the third-largest in Michigan with $4.49 billion in total assets and 290,000 members.

New Buffalo Savings Bank at the end of the first quarter had $112.2 million in total assets and $90.8 million in deposits, according to a quarterly financial report to the FDIC.

More deals ahead?

TCU’s extension further into the Michigan market could occur by acquisition, buying branches from another financial institution, or new office development, Marsh said. A couple of years ago, the credit union bought three former bank branches in Indianapolis, for example.

“There’s no one size fits all,” he said of TCU’s approach to expansion. “There’s a lot of different opportunities.”

The deal for New Buffalo Savings Bank, first announced in April 2019, closed June 5. The New Buffalo Savings Bank offices in New Buffalo, Three Oaks and Sawyer reopened the following Monday as TCU branches.

Now that the deal has closed, New Bancorp Inc. and New Buffalo Savings Bank will dissolve as a corporation within 120 days of the acquisition’s closing date. 

New Bancorp President and CEO Richard Sauerman joined TCU as vice president of commercial lending. He’ll lead commercial lending across the credit union’s footprint, Marsh said. 

The acquisition gave TCU a little geographic diversity and additional expertise in commercial lending, particularly for U.S. Small Business Administration loans where the credit union previously “dabbled our toes,” Marsh said. The credit union at the end of the first quarter had $377.1 million in total commercial loans to members, a 9.2-percent increase from a year earlier.

TCU also picked up a New Buffalo Savings Bank commercial loan office in Troy that the credit union plans to expand, Marsh said. He describes TCU’s commercial lending posture as “mostly proactive,” and competing with larger regional banks.

“You have to go out and look for business,” he said.

Credit unions keep buying

The deal for New Buffalo Savings Bank marks the latest transaction in recent years in which a credit union has bought a small community bank.

There were 16 community bank acquisitions by credit unions across the U.S. in 2019, up from nine transactions in 2018, according to a May article on the online banking publication Bankingdive.com.

Michael Bell, an attorney at Royal Oak-based Howard & Howard PLLC who specializes in credit union acquisitions of community banks, said that although he remains busy, the trend seems to have eased in 2020 because of the COVID-19 pandemic.

“I have certainly seen some deals go on a short pause, but things have not stopped altogether,” Bell said. “Whenever this ends or gets more normalized, I absolutely expect a sharp uptick in activity. There will be more sellers selling, and cash buyers will have a very strong currency.”

Lately, Bell said he has “started to see a possible uptick in activity. We will see if it holds.” 

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