Shaky economy slowed credit union-bank deals in 2023

December 28, 2023 10:59 AM

After 16 deals involving credit unions buying banks were announced last year, just 11 such agreements were reached by mid-December in 2023.

Blame the dip on economic uncertainty, said attorney Michael Bell of the law firm Honigman in Michigan.

Bell, who has advised the vast majority of credit unions on bank purchases in recent years, said the total number of deals announced this year is far lower than the market would have demanded in normal conditions.

"The general economic tumult had a material effect on deals," Bell said in an interview. "But I do expect more announcements before year end and into January."

If general economic conditions begin to improve, Bell expects an "absolute torrent" of deals to come together next year. "There is more pent-up demand now than I have ever experienced in my career," he said.

Below is a compilation of American Banker's coverage of the 2023 deals.

A busy August

Of the 11 deals that credit unions announced in 2023, six were struck in August.

Harborstone Credit Union early in the month announced a tie-up with First Sound Bank in Seattle. That was followed by two bank purchases each for both Michigan State University Federal Credit Union and Five Star Credit Union.

Sandwiched in the middle was Financial Credit Union in Panama City, Florida, agreeing to buy First National Bank Northwest Florida.

And although August was busy, there would be only one credit union-bank deal announced in the rest of the year.

Largest credit union-bank deal of 2022 happened in New Mexico

The largest community bank acquired by a credit union in 2023 was the $388 million-asset Western Heritage Bank in Las Cruces, New Mexico.

The $4.1 billion-asset Nusenda Credit Union in Albuquerque said that when finalized, the combined company will have 29 branches and over 800 employees to serve more than 260,000 members.

The deal was the first bank acquisition for Nusenda. In fact, three of the first four credit union-bank deals announced this year involved credit unions that were first-time bank buyers.

The Nusenda-Western Heritage deal also marked the first time a New Mexico community bank had been acquired by a credit union.

Let's try it again

Two of the banks that sold to credit unions in 2023 had previously struck deals to sell themselves, but those transactions ultimately failed to close.

In 2021, BM Technologies agreed to pay $23 million for First Sound Bank. But that deal was called off in December 2022 after regulatory delays pushed it beyond its expected closing window. Harborstone Credit Union announced plans to acquire First Sound in August.

First National Bank Northwest Florida last year announced a deal with Harvesters Credit Union in Cantonment, Florida, but it was eventually scuttled. So the Panama City bank found a new buyer in Innovations Financial Credit Union, which is also based in Panama City.

Illinois, Georgia saw most banks sold to credit unions

Three of the 11 community banks bought by credit unions in 2023 were located in Illinois, and two others were headquartered in Georgia.

Both states also had three banks sell to credit unions last year.

In Illinois, Nokomis Savings Bank, McHenry Savings Bank and Algonquin State Bank all sold to credit unions. Michigan State University FCU bought the latter two.

OneSouth Bank and Wilcox County State Bank in Georgia also both sold to the same buyer, Five Star Credit Union in Alabama.

Some credit unions came back for more

Five Star Credit Union in Alabama, which announced deals for both OneSouth Bank and Wilcox County State Bank in Georgia this year, has been an active buyer of banks before.

The $775 million-asset Five Star bought Flint River National Bank in Camilla, Georgia, in 2014, and Farmers State Bank in Lumpkin, Georgia, in 2015.

Also, Land of Lincoln Credit Union in Decatur, Illinois, agreed to acquire Nokomis Savings Bank. It was the second bank deal for Land of Lincoln since late last year. In December, the credit union announced it had agreed to acquire Colchester State Bank in Colchester, Illinois.