Credit union to buy second bank, expand in Washington state

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Sound Credit Union in Tacoma, Washington, agreed to acquire Washington Business Bank in Olympia.

The cash deal, expected to close in the fourth quarter, would bolster the $2.9 billion-asset credit union's presence in Olympia and expand its commercial lending capabilities. The $105 million-asset Washington Business Bank provides deposit, lending and cash management services to commercial clients as well as deposit products for retail consumers.  

"Washington Business Bank has served as a cornerstone for local business owners for more than 20 years," said Don Clark, president and CEO of Sound. "We look forward to providing these new members the same level of excellent service, an expanded suite of products and services, as well as all the benefits membership in a credit union brings to help their businesses and families thrive."

Shareholders of Washington Business Bank would receive between $34-$36 in cash for each share of common stock they own, subject to certain adjustments at closing.

The combined institution would have approximately $3 billion of assets, $2.3 billion of loans and $2.5 billion of deposits. It would have more than 170,000 members and 27 branches throughout King, Pierce, Snohomish and Thurston counties of Washington.

Sound would continue to operate Washington Business Bank's current branch in downtown Olympia and have two branches in the city in total.  

The transaction marks the second bank acquisition for Sound Credit Union. It completed its buyout of the $200 million-asset Bank of Washington in Lynnwood in 2019. At the time, it was the first credit union purchase of a bank in the state.

That deal added to Sound's footprint in Snohomish and King counties and expanded its mortgage and business lending operations. Sound also has closed multiple acquisitions of small credit unions.

The acquisition extends a trend of bank sales involving credit union buyers. It is the sixth such deal announced this year, putting 2024 on pace to top last year's total of 11 and the record 16 announced in 2022.  

Credit unions have acquired small community banks to gain scale, expand footprints and diversify their business lines. Historically, credit unions have served consumers in relatively limited market territories.  

Small banks, meanwhile, are selling to both larger banks and to credit unions because many lack the size and resources needed to cover mounting regulatory costs and digital banking expenses, including cybersecurity.

These deals, however, are controversial. The Independent Community Bankers of America and other banking industry advocacy groups note that credit unions are exempt from federal taxes and, when they buy banks, remove tax revenue and competition from communities.

Sound Credit Union was advised in the transaction by ALM First and Honigman LLP. Washington Business Bank was advised by D.A. Davidson and Lane Powell PC.

Attorney Michael Bell with Honigman told American Banker just ahead of the start of the year that economic uncertainty had slowed deal activity in 2023. But Bell, who has advised the majority of credit unions that sold to banks in recent years, predicted a rebound this year as long as the economy continues to prove resilient.

"There is more pent-up demand now than I have ever experienced in my career," he said.