EDWARDSVILLE, Ill.—The $1.6-billion Scott Credit Union here has agreed to purchase $93-million Tempo Bank, based in Trenton, Ill.
The deal marks the fifth CU purchase of a bank in the last three weeks, and comes on the heels of an announcement by FAIRWINDS Credit Union that it is acquiring Citizens Bank of Florida.
Scott Credit Union said it will purchase substantially all of assets and assume substantially all the liabilities—including all of the deposit account liabilities—of Tempo Bank.
In a joint release, the CU said it will pay Tempo Bank $14,250,000 in cash as consideration in the P&A transaction, subject to dollar-for-dollar reduction if Tempo Bank’s total equity at closing is below $10,194,000.
Sugar Creek Financial Corp., the banks’ holding company, and Tempo Bank, have the right to terminate the purchase and assumption agreement if the aggregate cash consideration is less $9,425,000, Scott CU stated.
According to the statement, following the completion of the P&A transaction and after all of the respective obligations of Sugar Creek and Tempo Bank are settled, Tempo Bank will liquidate and distribute its remaining assets to Sugar Creek, and then Sugar Creek will dissolve and distribute its remaining assets to its stockholders.
Sugar Creek’s stockholders are currently estimated to receive in the dissolution between $14.50 and $16.50 in cash in exchange for each share of Sugar Creek common stock owned. Currently, Sugar Creek has 790,701 shares of common stock outstanding.
“The per-share consideration is subject to significant variation based on various factors including Tempo Bank’s ability to meet the minimum equity value at the closing of the P&A transaction; the regulatory treatment of and costs associated with the liquidation accounts; the amount of cash held by Sugar Creek at the closing of the dissolution; costs related to the termination of Tempo Bank’s defined benefit retirement plan…,” the bank stated.
The distribution of cash representing the per share consideration to Sugar Creek’s stockholders at the closing of the dissolution is expected to occur within several months after completion of the P&A transaction and the liquidation, the bank stated.
“We are excited for the opportunity to partner with Tempo Bank and to improve access to our service in Clinton County,” said Frank Padak, president and chief executive officer of Scott Credit Union. “Tempo Bank is a well-managed bank and we believe its robust mortgage lending portfolio will be beneficial to the credit union as we continue making strides for our goal of long-term growth.”
The acquisition of Tempo Bank’s assets includes its main office in Trenton and its branch office in Breese, Ill., which will increase Scott Credit Union’s total footprint to 22 locations across the Metro East and St. Louis area.
Fulfilling the Strategic Plan
Scott CU said the acquisition is part of its strategic growth plan, which includes adding branches.
“Scott Credit Union’s values are rooted in our commitment to our local community. With Scott Credit Union offering service through 22 branches, this transaction will be mutually beneficial for Tempo Bank’s customers and Scott Credit Union members alike,” Padak continued. “One of our goals is to provide close, convenient branch access for those living or working in our service area. In addition to our Lebanon location, which was added in 2020, the acquisition of Tempo Bank’s offices helps us make progress towards that goal, especially for residents of Clinton County.”
Added Robert J. Stroh, Jr., chairman, chief executive officer and chief financial officer of Sugar Creek Financial Corp. and Tempo Bank, “Tempo Bank is proud of our long history of
being locally owned and operated, and we’re excited to be joining another local financial institution that shares the same sense of pride in the Metro East. We know our customers will benefit from all the additional resources that Scott Credit Union has to offer while knowing that their money is staying right here in the community.”
Stroh stated that following the consolidation he intends to retire after more than 45 years of service with Tempo Bank. Scott Credit Union said it intends to offer a consulting agreement to Stroh for a period of time following the consolidation.
Closing Conditions
According to the two organizations, the transaction has been unanimously approved by the board of directors of Sugar Creek, Tempo Bank and SCU and is expected to close in the second quarter of 2022, subject to customary closing conditions including the approval of Sugar Creek’s stockholders and regulatory approval.
Sugar Creek’s stockholders will vote on the P&A transaction and the dissolution. Sugar Creek, as the sole stockholder of Tempo Bank, will vote on the liquidation.
Tempo Bank posted a modest profit of $87,000 in 2019, $2.2 million in 2020, and made $1.6 million through March of 2021, according to FDIC data. Scott CU made $8.3 million in net income in 2019, $4.5 million in 2020, and $4.8 Million through June of this year, according to Call Report data. The CU has 8.8% net worth and ROAA this year of .65%.
‘Noteworthy’ Purchase
This buy is really noteworthy,” stated Michael Bell, the pioneer of CU purchases of banks and a partner and co-chair of the Financial Institutions Practice Group at Honigman, LLP, which is representing Scott CU. “This is the fifth deal announced in the past few weeks. The pace has certainly quickened. Banks continue to decide to sell to credit unions. There are certainly more in the works and more should announce before year end.”
Bell has been involved in more than 40 whole-bank agreements, plus additional bank branch purchases.