Credit unions ramped up bank-buying in 2022

December 22, 2022 12:06 PM

Four credit unions announced bank purchases so far in December, driving the total number of such deals beyond 2021’s level.

There have now been 15 announcements in 2022 of a credit union buying a bank, surpassing last year's total of 13.

The most credit union-bank deals ever announced in one year was 16, in 2019, but a few of those deals ultimately failed to close.

Below is a compilation of American Banker coverage of the 2022 deals.

A small flurry of deals in December

In the fourth deal announced in December in which a credit union would buy a community bank, Alabama One Credit Union in Tuscaloosa agreed to acquire First Bank, a subsidiary of Peoples Independent Bancshares in Boaz, Alabama.

Earlier in the month, LGE Community Credit Union in Atlanta said it is acquiring Greater Community Bank in Rome, Georgia.

Also, Dort Financial Credit Union in Grand Blanc, Michigan, said it had agreed to buy Flagler Bank in West Palm Beach, Florida. And Veridian Credit Union in Waterloo, Iowa, agreed to buy American Investors Bank and Mortgage in Eden Prairie, Minnesota.

Those four deals made December the most active month of the year. The next biggest month was February, which saw three credit union-bank merger announcements.

Largest credit union-bank deal of 2022 happened in Tampa

The largest community bank acquired by a credit union in 2022 was the $689 million-asset First Citrus Bank, a subsidiary of Tampa, Florida-based First Citrus Bancorp.

DFCU Financial, which is based in Dearborn, Michigan, said in May it plans to enter the Florida market through the acquisition.

The $6.4 billion-asset DFCU said shareholders of First Citrus will receive $47.75 in cash for each share owned, but the full purchase price was not disclosed.

Ryan Goldberg, president and chief executive of DFCU, said the acquisition of First Citrus will represent a significant increase in the credit union's commercial lending presence and expertise.

Midwest will continue to be a hotspot for deals

Attorney Michael Bell of the law firm Honigman has advised the vast majority of credit unions on bank purchases in recent years, and 2022 was no different, as he advised on 11 of the 14 deals.

Bell said overall the average deal size has increased this year, and he expects that to continue in 2023.

"I also expect geographic diversity to increase," Bell said. "And I expect that the political winds will stop blowing or blow less, and the free market will prevail in 2023."

The Midwest will likely remain an attractive area for credit union-bank deals into 2023, he predicted.

"There are so many smaller banks in Wisconsin, Minnesota, Illinois, etc., that more of these will happen in these states versus states with fewer small banks," Bell said.

Georgia, Florida and Illinois were where the most banks sold to credit unions

Three states had three of their community banks enter deals to sell themselves to credit unions this year — Georgia, Florida and Illinois. Wisconsin was the site of two deals, and Minnesota, Arizona, Arkansas and Alabama each had one.

Two of the Illinois bank deals were announced in the same week in June. One of those was Credit Union 1's acquisition of $311 million-asset NorthSide Community Bank.

Including the three this year, nine Illinois-based community banks have entered deals to be sold to credit unions in the past couple of years, said Randy Hultgen, president and CEO of the Illinois Bankers Association. He said the trend is "troubling" for the future of community banking.

"Congress should tax large credit unions over $500 million in assets, and federal credit unions should comply with federal [Community Reinvestment Act] requirements to demonstrate that they aren't abandoning Illinois communities," he said in an email.

Some states and bank trade groups are pushing back

Some states have begun taking action against credit unions taking banks off the tax rolls.

In Tennessee, a judge issued a temporary injunction blocking Orion Federal Credit Union in Memphis from buying the $774 million-asset Financial Federal Bank, although the injunction was later lifted.

And the Nebraska Department of Banking and Finance in January shot down the proposed sale of the $395 million-asset Premier Bank in Omaha to the $8 billion-asset GreenState Credit Union in North Liberty, Iowa.

Earlier this year, the Community Bankers Association of Illinois submitted legislation that would require an exit fee when credit unions buy banks.

Minnesota Bankers Association President and CEO Joe Witt said the credit union tax exemption gives those institutions a competitive advantage.

"Credit unions buying community banks is the logical, predictable outcome of the credit union industry's 100% income tax exemption," Witt said.

Some 2022 credit union buyers were repeat customers

A few of the buyers in 2022 had acquired other community banks in previous years.

LGE Community's deal was its second bank acquisition. The company bought Georgia Heritage Bank in 2018.

Wings Financial Credit Union in Apple Valley, Minnesota, agreed in November to buy Settlers Bank in DeForest, Wisconsin. The credit union bought Brainerd Savings & Loan in Minnesota last year.

And Georgia's Own Credit Union in Atlanta agreed to buy Vinings Bank in Smyrna, Georgia. It would be the second bank acquisition for the $3.4 billion-asset institution, which bought State Bank of Georgia in Fayetteville in 2018.