Minnesota Regulator Rejects Credit Union-Bank Deal; Seventh State to Stifle Such Deals

The Minnesota Department of Commerce denied Eau Claire, Wis.-based Royal CU's proposed acquisition of Lindstrom, Minn.-based Lake Area Bank after concluding that a Minnesota state-chartered bank may be acquired only by another bank, savings bank or trust company under Minnesota law, ABA Banking Journal reported April 4.

The department also concluded that state-chartered banks are not allowed to transfer assets and liabilities to a credit union to consolidate or merge out of existence.

Under the transaction announced in August 2021, Royal CU agreed to acquire Lake Area Bank in an all-cash transaction expected to close during the first quarter of 2022.

Royal CU was unable to comment on the proposed acquisition, President and CEO Brandon Riechers told S&P Global Market Intelligence April 7. "We have restructured the original transaction and are currently under a binding purchase agreement," Riechers said, adding that additional details will be disclosed at an "appropriate time."

The Minnesota Bankers Association said the rejection provides needed clarification on the legality of such deals within the state, BankBeat reported April 5. Executive Director Joe Witt did not take a stance on whether the Minnesota Bankers Association agrees with the state statute, according to the report.

The regulatory decision makes Minnesota the seventh state to make a move to stifle credit union-bank M&A deals, following Iowa, Colorado, Nebraska, Tennessee, Mississippi and Illinois.