During the second quarter of 2017, Advia Credit Union (Parchment, MI) issued $5 million in subordinated debt with a 10 year term.
Advia Credit Union has a low-income designation, which allowed the credit union to raise secondary capital.
On September 1, 2017, Advia Credit Union acquired Peoples Bank (Elkhorn, WI).
While the issuance of subordinated debt and the merger are closely timed, this appears to be a coincidence.
According to Jeff Fielder, EVP of Finance at Advia Credit Union, "[t]he issuance of this debt was not a condition of the acquisition of Peoples Bank. However, our management team and board saw value in raising capital to reduce the minor dilution that would occur with the acquisition."
As of March 2018, the issuance of subordinated debt boosted the $1.7 billion credit union's net worth by almost 30 basis points.
In addition, Fielder noted that Advia saw value in diversifying its capital base, which would position the credit union for future growth.
Fielder further commented that the credit union, at this time, does not plan to issue any additional subordinated debt.
Going forward, more large, low-income designated credit unions will issue subordinated debt.
That is $5 million of capital at risk before the NCUSIF would have to pay out one penny and further protects the US taxpayers who ultimately back up all insured savings at credit unions AND banks.
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