The CU Two-Step: Kicking Up Fees for Wall Street

WALL STREET – When Citizens Community Bancorp, known until January 2002 as Citizens Community FCU, issued $52 million in stock in October to pay for its 2005 acquisition of Community Plus Savings Bank, another ex-credit union, investment bank Keefe Bruyette & Woods earned $656,000 in underwriting fees for the transaction. It was the second-step in the two-step conversion to public company for the ex-credit union, representing another chance at fat investment banking fees for KBF, which earned $560,000 when it underwrote Citizens' initial public offering, KBF, which just went public itself in an October IPO, has been the largest beneficiary of credit union conversions, Securities and Exchange Commission filings show. The Wall Street bank has earned more than $6 million in underwriting fees from the conversions of former credit unions to investor-owned banks. That goes all the way back to 1999 when KBF took IGA Bank (IGA FCU) public, the first credit union convert to test the capital markets, which culminated in the takeover of the former credit union less than two years later. Since then KBF has taken many of the converted credit unions public and earned healthy fees doing it, including $1.8 million for Rainier Pacific Bank (Rainier Pacific CU); $1.3 million for First Pacific Trust Bank (First Pacific FCU); $460,000 for Heritage Bank of the South (AGE FCU) and $1.2 million for ViewPoint Bank (Community CU) just two months ago. Other investment banks have earned lucrative fees for underwriting public offerings for former credit unions, including the $1.4 million earne din 2005 by Friedman Billing Ramsay for taking Atlantic Coast Bank (Atlantic Coast FCU) public, and Sandler O'Neil & Partners LP, which earned $500,000 for underwriting the 2003 IPO for Synergy Financial Group (Synergy FCU).