Houston-area credit union buying bank to expand in energy lending

Texas Dow Employees Credit Union plans to acquire a bank in neighboring Louisiana to diversify and expand its commercial lending capabilities, especially in the agriculture and energy sectors.

Lake Jackson-based TDECU, the Houston area's largest credit union with $4.7 billion of assets, said Tuesday it would buy the $1.2 billion-asset Sabine State Bank and Trust in Many, Louisiana. Financial terms were not disclosed. The deal is expected to close in early 2025.

"TDECU is on a growth journey to expand across the state of Texas and beyond," President and CEO Isaac Johnson said in a release announcing the deal. "This acquisition extends our reach to more communities, diversifies our commercial portfolio, and makes our balance sheet even stronger."

The merged institution would have assets of about $6 billion and 471,000 members.

Sabine has 51 branches in western Louisiana and east Texas, a region with an abundance of oil and gas. American production of oil and natural gas reached all-time high levels early in 2024 amid mounting global demand, according to the U.S. Energy Information Administration. The region in which Sabine operates is home to a large share of that production.

While the U.S. and several state governments push for greater use of renewable fuels, an advancing American economy continues to galvanize demand for oil and gas as well.

What's more, major economies in Asia are buying more American oil and gas as they grow. Europe also has turned to U.S. gas exports to fill a void left after the continent cut ties with Russian energy in protest of the Kremlin's invasion of Ukraine.

Rystad Energy analyst Jorge León said American fuels in the near term "are particularly relevant given that peak summer demand is approaching" and in the long term as global populations swell and energy supplies from other countries, including Russia and Saudi Arabia, are less reliable amid geopolitical tumult in Eastern Europe and the Middle East.

At the same time, fossil-fuel drillers are increasingly in need of new banking options because national lenders such as JPMorgan Chase and Wells Fargo have in recent years pulled back on oil-and-gas lending amid pressure from investors to distance their loan books from sectors linked to climate change.

Sabine specializes in commercial loans with industry concentrations in oil and gas as well as agriculture. It has depository relationships with municipalities and other public institutions, including school districts, fire districts and law enforcement agencies.

"Our customers can rest assured that they will continue to experience the best-in-class service they count on from us" and "that service will be enhanced with an even wider array of financial products to help them better secure their futures," Lee McCann, president and CEO of Sabine, said in the release.

The TDECU-Sabine deal is the eighth transaction in 2024 in which a whole bank announced it would sell to a credit union. It put this year on pace to eclipse the record 16 credit union-bank deals announced in 2022. Eleven credit union-bank tie-ups were announced last year.

The only bank larger than Sabine to announce a sale to a credit union so far this year was the $1.5 billion-asset First Financial Northwest Bank, which agreed in January to sell itself to Global Federal Credit Union. The $11.8 billion-asset Global, which was formerly known as Alaska USA Federal Credit Union, said it would pay $231.2 million in cash for the Renton, Washington-based bank.