OneAZ Credit Union in Phoenix said it struck a deal with Western Arizona Bancorp to acquire its 1st Bank Yuma subsidiary. The transaction marked the 17th so far this year involving a credit union buying a bank –
The $3.4 billion-asset OneAZ said in a press release Thursday the all-cash deal — a bid for scale and diversity — would add more than $600 million of assets, about 20,000 more members and five branches. The acquisition would "significantly" expand its reach in Southern Arizona. Yuma is a city in the southwestern corner of Arizona, near the borders of California and Mexico.
Should the deal close as planned in mid-2025, OneAZ would have more than $4 billion of assets, serving about 220,000 members throughout Arizona. The two organizations are expected to be fully integrated in 2026. Deal terms were not disclosed.
"This partnership expands our reach into the rapidly growing markets of Yuma and Santa Cruz counties," said Brandon Michaels, president and CEO of OneAZ.
The credit union-bank merger record was tied last month, when ESL Federal Credit Union in Rochester, New York, said it planned to acquire in-state rival
Overall, about
Credit union buyers were involved in nearly a fifth of the deals to date this year.
Deal activity has accelerated this year alongside expectations for the Federal Reserve to lower interest rates, support economic growth and bolster banks' credit quality. The Fed delivered a 50 basis point rate cut last month. Reduced credit costs tend to ease concerns about vulnerable borrowers defaulting on loans. This, in turn, bolsters bank buyers' ability to assess the health of sellers and finalize deals.
"With the recent rate cut by the Federal Reserve, we anticipate that the number of credit union-bank transactions will continue at its current pace through the end of 2024 and into 2025," said attorney Jeff Cardone of Luse Gorman, which advised OneAZ on the transaction.
Community banks are selling to both larger banks and to credit unions to gain the size needed to manage high regulatory and digital-banking expenses.
Credit unions are acquiring banks to gain scale and diversify both their business lines and footprints. They pay cash and simplify deal terms, providing appeal to many sellers. Credit unions also say that when they acquire banks they tend to keep acquired branches and staff in place, maintaining local financial services. When banks buy other banks, they often close overlapping branches and lay off redundant staff to increase the profitability profile of the combined company.
The trend of selling to credit unions has accelerated this year despite persistent opposition from critics.
Bank trade groups note that credit unions are exempt from federal taxes so that they can cater to underserved markets or constituencies. When they buy banks, credit unions stray from that mission and effectively become banking companies while retaining their special tax status, critics say, creating an unfair playing field.
Critics such as Independent Community Bankers of America President and CEO Rebeca Romero Rainey also argue that local communities lose tax revenue.
"ICBA and community bankers continue our calls for Congress to hold hearings and to consider an exit fee on credit union acquisitions of tax-paying banks to capture lost tax revenue resulting from these deals, which is in line with historical precedent," Rainey said in a statement.
"In 1951, Congress revoked the tax exemption for building and loan associations, cooperative banks, and mutual savings banks, finding that these institutions operated much like commercial banks and should be taxed accordingly," she added. "Congress should thoroughly investigate the nation's outdated credit union policies and whether the government should continue subsidizing community banking consolidation."
