MidWestOne to exit Florida by selling branches to credit union

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MidWestOne Financial Group is leaving the Florida market.

The Iowa City, Iowa-based holding company for MidWestOne Bank said in a press release Monday that it is selling its Florida operations to DFCU Financial, a credit union based in Dearborn, Michigan.

The $6.5 billion-asset MidWestOne would receive a deposit premium of 7.5%, or approximately $11.9 million, pre-tax, based on its deposits as of June 30. 

The sale would include $158.8 million of deposits, $162.2 million in loans and its two branches — one in Naples and the other in Fort Myers. The deal is expected to close in the first or second quarter of 2024.

Charles "Chip" Reeves, MidWestOne's CEO, said that as part of its long-term strategic planning process, the company reviewed its geographic footprint with a focus on improving scale and profitability. 

"While our Florida operations have been performing well, we never reached the scale to allow this market to become a growth driver for MidWestOne without significant investment. This divestiture is an important step in the successful execution of our strategic plan," Reeves said in the press release. 

MidWestOne also has offices in Minnesota, Wisconsin, Colorado and its home state of Iowa. 

The $6.4 billion-asset DFCU Financial said in 2022 that it planned to enter the Florida market through the acquisition of the $689 million-asset First Citrus Bank, a subsidiary of Tampa, Florida-based First Citrus Bancorp. That deal was completed in January.

First Citrus was one of the largest community banks acquired by a credit union in recent years.

Though banks have been trimming their branch networks, there have not been many branch sales to credit unions in 2023. Citizens State Bank in Woodville, Texas, is one of the rare exceptions. It announced in January that it would sell one of its five branches to First Central Credit Union in Waco, Texas.

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Attorney Mike Bell, who advised DFCU on the branch transaction, said the dearth of those deals is due to a shortage of sellers, not buyers.    

"That said, I am seeing more activity in the marketplace at the moment. Sellers are realizing the gains in efficiency, expense reduction and gain on sale are worth the effort," Bell said in an interview.

There have been 10 deals involving credit unions buying banks announced so far in 2023 after 16 such deals were announced last year.

Most recently, the $7.7 billion-asset Michigan State University Federal Credit Union in East Lansing earlier this month agreed to buy the $145 million-asset Algonquin State Bank in the Chicago metropolitan area.

MidWestOne Financial Group reported net income of $7.6 million in the second quarter, down 40% compared to the same period a year earlier, according to the bank's earnings report.

DFCU earned $49 million in the first half of 2023, a 23% increase compared with a year earlier, according to call report data from the National Credit Union Administration.

Hovde Group served as financial advisor and Barack Ferrazzano Kirschbaum & Nagelberg provided legal counsel to MidWestOne. Donnelly Penman & Partners served as financial advisor and Honigman provided legal counsel to DFCU Financial.