Credit Union 1 president: Acquisition 'a great opportunity'

RANTOUL – At a time when two area financial institutions have been burned by branching into distant markets, Credit Union 1 is enthusiastically extending its operations far afield.

The Rantoul-based credit union has agreed to acquire the assets of Cumorah Credit Union, which has two offices each in Las Vegas and Henderson, Nev.

Those offices are more than 1,600 miles from Credit Union 1, which has 23 offices in Illinois and two in Indiana.

Cumorah, which serves members of the Church of Jesus Christ of Latter-Day Saints in Nevada, was recently seized by Nevada regulators after it became undercapitalized.

The credit union's private insurance company, American Share Insurance, was appointed the receiver for Cumorah, and Credit Union 1 acquired the operations last Friday.

Contacted in Nevada, Credit Union 1 President Paul Simons called the acquisition "a great opportunity" for his credit union.

He said it was "a great way to diversify" geographically and said the average share balance of Cumorah members is greater than that of Credit Union 1 members in Illinois.

Simons said Credit Union 1 received a loss-mitigation payment from American Share Insurance, but would not disclose the total.

"Suffice it to say, we're protected against any severe losses," he said.

Commercial real estate loans were largely to blame for Cumorah's woes, Simons said. Although Cumorah was once "very successful" in making those loans, he vowed Credit Union 1 would not make any more of those loans in that market.

"Credit Union 1 doesn't do business lending, and we don't intend to do business lending in our Nevada operations either," Simons said.

The credit union will work with existing commercial real estate loan customers, "but once those are paid off, we don't intend to go into that market at all. It's not something we're comfortable with," he said.

Nevada – like California, Arizona, Florida and Michigan – was particularly hard-hit when real estate prices tumbled, upsetting the portfolios of lenders in what had been high-growth areas.

Credit Union 1's move comes as Urbana-based First Busey Corp. and Wisconsin-based CIB Marine Bancshares struggle with long-ago expansions into distant markets.

First Busey, which operates primarily in central Illinois and Indianapolis, established a niche in the Fort Myers, Fla., area. But red ink from the Florida banking operations eventually prompted the company to merge its Florida and Illinois banks.

CIB Marine Bancshares started off as a Champaign County bank but eventually grew to serve the Chicago, Milwaukee, Indianapolis, Las Vegas and Scottsdale, Ariz,, areas, as well as Omaha, Neb.

Loan losses in the Chicago area eventually forced CIB Marine to sell off most of its operations and concentrate largely on central Illinois. The company is now waiting to emerge from Chapter 11 bankruptcy.

Simons was named the interim CEO of Cumorah in early October after its previous CEO resigned.

He said at first he had "no intention" of assuming Cumorah's assets, but after looking at it closely, his reaction was, "Wow! What an opportunity!"

During the first two weeks of October, Credit Union 1 had discussions with American Share Insurance and credit union regulators in Illinois and Nevada.

The Credit Union 1 board approved the deal at a special meeting Oct. 17, and final details were worked out last week. The deal does not require approval from Credit Union 1 members, Simons said.

Simons said Credit Union 1 previously looked at acquiring Cumorah in July and August, but decided against it, because terms from American Share Insurance were "not to our satisfaction."

"You have to be careful about how you structure the deal to make sure it does not come back to hurt existing membership," he said.

Like Cumorah, Credit Union 1 is privately insured by American Share Insurance. Simons is vice chairman of the American Share Insurance board of directors.

Credit Union 1 has about 80,000 members in Illinois and roughly $540 million in assets. Cumorah has about 15,000 members and $157 million in assets, Simons said.

As for the logistics of having offices so far away, Simons said a 3 1/2 hour flight to Las Vegas isn't much different from a 3-hour drive to Indianapolis.

"This is the age of video conferencing," he added. "It's not like it's difficult to manage from afar."

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