For the second time this week and the seventh time in 2023, a credit union announced its intention to buy a bank.
The latest deal, Michigan State University Federal Credit Union's bid to acquire McHenry Savings Bank, would create a combined institution with about $8.2 billion of assets, $6.3 billion of loans and $6.7 billion of shares and deposits. It would operate 31 branches throughout Michigan and Illinois. The McHenry, Illinois-based target has $322 million of assets.
Importantly for the buyer, the deal would expand its reach in the Greater Chicago market, the largest in the Midwest. The $7.7 billion-asset MSUFCU in East Lansing, Michigan, currently has five branch locations in downtown Chicago, and the deal would add another three branches in suburban markets. Management said earlier this year that the institution was
"This transaction provides an excellent opportunity to further expand and complement our services in McHenry County and the surrounding Chicagoland area," April Clobes, president and CEO of MSUFCU, said in a release late Monday announcing the deal. "We look forward to the combined synergies our two organizations will achieve in our local communities while providing McHenry Savings Bank's clients with an expanded array of resources and products."
The transaction is expected to close in the first quarter of 2024. Shareholders of McHenry Bancorp, the selling bank's parent company, would receive approximately $39 to $41 in cash for each share of common stock, subject to adjustment based on McHenry Savings Bank's equity value at closing.
The deal is among a growing string of transactions involving a
Earlier on Monday, Five Star Credit Union announced a deal for the $215 million-asset OneSouth Bank in Macon, Georgia. The $775 million-asset Five Star, which is based in Dothan, Alabama, previously bought two other Georgia banks:
Acquisitive credit unions are pursuing banks as part of efforts to diversify their business lines — often bolstering their business lending capabilities — while pushing for market share gains and talent.
From a seller's perspective, "credit unions, which have been very active in buying banks, still provide a good alternative for community banks in the right circumstances — cash, fair price, minimal employee disruption," Eric Corrigan, senior managing director at Commerce Street Capital, said in a report.
Still, he noted, such deals are controversial and are vulnerable to bank industry pushback.
Critics have long argued that many credit unions stray from their core mission of serving people of modest means in limited geographic areas when they buy banks. Credit unions get tax exemptions because of their mission.
Opponents of these deals argue that when credit unions take out banks, they become essentially indistinguishable from commercial banks by expanding into business and commercial real estate lending — yet they retain special tax status that gives them a taxpayer-funded competitive advantage.
Also at issue is whether credit unions have an unfair advantage in purchasing banks. Because credit unions are not taxed, bank lobbyists such as the Independent Community Bankers of America say credit unions are able to pay a premium for acquisitions that bank buyers can't match. The ICBA has called for a tax on credit union-bank mergers.
The Credit Union National Association, the credit union industry's largest trade group, has continued to defend the tax exemption, noting that credit unions are nonprofits that pass along
MSUFCU's deal in Chicago is subject to regulatory approvals and needs a formal vote in favor by the shareholders of McHenry Bancorp.
MSUFCU was advised by Piper Sandler and Luse Gorman. McHenry Bancorp was advised by Janney Montgomery Scott and Godfrey & Kahn.
