Minnesota thrift latest addition to MidCountry Financial

Northwestern Financial Review, Jun 15-Jun 30, 2004 by Bengtson, Tom

With the May 14 announcement that MidCountry Financial Corp will buy FSF Financial Corp., Robert F. Hatcher is advancing his plan to build a diversified financial services company that looks a lot like the company he sold to BB&T Corp., four years ago. Hatcher is president and CEO of MidCountry Financial Corp., of Macon, Ga., the home of First Liberty Financial before it was purchased by Winston-Salem, N.C.based BB&T in 2000. Hatcher had been president of the $1.8 billion First Liberty Financial.

"We ran First Liberty Financial for 10 years but when BB&T bought it, the management team was broken up," said Hatcher. "Now I want to bring the team back together."

Hatcher's latest move brings into the company FSF Financial Corp., of Hutchinson, Minn. FSF Financial, formed in 1994, is the parent company for First Federal Bank, a federally chartered stock savings bank with 13 offices in Minnesota. The holding company also owns Homeowners Mortgage Corp., Firstate Investments, and Insurance Planners of Hutchinson, Inc. In an $83.4 million deal, MidCountry Financial is paying $35 per share for FSF Financial. The price is 1.55 times FSF Financial's book value.

MidCountry Financial was formed in August 2002 when it used a portion of its $32 million in startup capital to buy Heights Financial Corp., of Peoria, Ill. The consumer finance company has offices in Illinois, Indiana, Kentucky, Tennessee and Missouri.

Last December, MidCountry purchased Bayside Financial Corp., of Minnetonka, Minn. Bayside is the holding company for Bayside Bank, a federally chartered savings bank formed in 1997 with $2.6 million in capital. It grew to a $75 million institution with three offices and 40 employees. Robin Roberts, president and CEO of Bayside Bank, said the bank is strong in consumer lending and mortgage banking. She told a local business journal that it is in the process of hiring lenders to expand its commercial lending capability.

In a separate deal that is scheduled to close in August, MidCountry is buying ComBank Inc., the holding company for Community National Bank of Metropolis, Ill. That bank has 10 branches.

Hatcher said the plan is to merge the three savings banks into one thrift by the end of the year. It will sport the new name of MidCountry Bank.

"These companies are the first building blocks in realizing our vision of having $1 billion in assets, providing diversified financial services and returning a minimum 15 percent return on investor capital," Hatcher says on the company's web site.

Completion of the FSF Financial acquisition is subject to several conditions. In order to meet its obligations under the agreement, MidCountry is required to obtain financing. It has represented in the agreement that it will have sufficient funds to complete the merger at closing, which is expected this fall. It has agreed to pay a termination fee of $1.7 million to FSF Financial if it is unable to obtain the financing. FSF Financial has agreed to pay $1.7 million to MidCountry in certain circumstances involving the acceptance by FSF Financial of an alternative proposal from a third party. FSF Financial's board of directors unanimously approved the transaction.

Hatcher, 61, is a native of Kawanee, Ill., and said he likes the opportunity offered by the Upper Midwest, where all of the company's operations are located despite it's Georgia headquarters. Hatcher is a member of the board of directors for BB&T. Prior to joining First Liberty Bank, Hatcher worked at Trust Company Bank (now SunTrust) for 27 years. Also serving on the board of MidCountry Financial Corp., is E. Lee Ellis, who served on the board of First Liberty Financial Corp and First Liberty Bank.

By Tom Bengtson