Illinois-based Scott CU to buy Tempo Bank in 10th CU-bank deal this year

Edwardsville, Ill.-based Scott CU will acquire substantially all assets and liabilities of Trenton, Ill.-based Sugar Creek Financial Corp.'s subsidiary, Tempo Bank.

The deal is expected to close in the second quarter of 2022. It marks the 10th credit union-bank deal this year and is the fifth deal in just 15 days.

Scott CU will pay Tempo Bank $14.25 million in cash as consideration, subject to a dollar-for-dollar reduction if Tempo Bank's total equity at closing is below $10.194 million. If the aggregate cash consideration falls below $9.425 million, Sugar Creek and Tempo Bank have the right to terminate the agreement.

At announcement, S&P Global Market Intelligence calculates the deal value to be 135.79% of common equity and tangible common equity, 10.30x earnings, 15.34% of assets and 18.65% of deposits. The tangible book premium to core deposits ratio is 6.17%.

S&P Global Market Intelligence valuations for bank and thrift targets in the Midwest region between Aug. 20, 2020, and Aug. 20, 2021, averaged 133.51% of book and 141.41% of tangible book and had a median of 17.06x last-12-months earnings, on an aggregate basis.

Following the completion of the purchase and assumption transaction and after all of the respective obligations of Sugar Creek and Tempo Bank are settled or otherwise accounted for, 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 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. 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 purchase and assumption transaction. Sugar Creek's shares most recently traded at $11.41 per share.

The distribution of cash representing the per-share consideration to Sugar Creek stockholders at the closing of the dissolution is expected to happen within several months after the completion of the purchase and assumption transaction and the liquidation. At present, Sugar Creek has 790,701 shares of common stock outstanding.

At June 30, Tempo Bank had total assets of $92.9 million, total deposits of $76.4 million and total equity of $10.5 million. The acquisition of Tempo Bank's assets will increase Scott CU's total footprint to 22 locations, according to a news release.

Based on S&P Global Market Intelligence data, with the completion of the deal, Scott CU will enter Clinton County, Ill., with two branches to be ranked sixth with a 6.35% share of approximately $1.24 billion in total market deposits.

After the consolidation of the two financial institutions, Sugar Creek and Tempo Bank Chairman, CEO and CFO Robert Stroh Jr. will retire. Scott CU intends to offer a consulting agreement to Stroh to consult with the credit union for a period of time following the consolidation, according to the news release.

Honigman LLP is acting as legal counsel to Scott CU. Luse Gorman PC is acting as legal counsel and Keefe Bruyette & Woods Inc. is serving as financial adviser to Sugar Creek and Tempo Bank.

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