Streak of bank sales to credit unions heats to record pace

Kevin Ruck - stock.adobe.com

For the 11th time this year, a community bank announced plans to sell to a credit union — matching the total for all of 2023 and putting the industry on pace to soar past the record.

The all-time high was 16 such deals in 2022. The industry is on track to eclipse that mark by October. 

The $2.5 billion-asset Atlanta Postal Credit Union said after the market closed on Thursday that it would acquire Affinity Bank in Covington, Georgia, in a deal expected to close late this year or early in 2025.

Atlanta Postal described the deal as a bid to deepen its presence in Georgia's largest city and its surrounding suburbs. The credit union would acquire the $870 million-asset Affinity Bank's branches in Northwest Atlanta and neighboring Newton County.

A week earlier, a fourth Washington state bank inked a deal to sell to a credit union this year — more than any other state. The $5.5 billion-asset Gesa Credit Union in Richland said it would acquire the $606 million-asset Security State Bank in Centralia in a transaction expected to close in 2025.  

During the first quarter of this year, Global Federal Credit Union in Anchorage, Alaska, announced in January it planned to acquire First Financial Northwest Bank in Renton. Tacoma-based Sound Credit Union said in March it would buy Olympia-based Washington Business Bank. That same month, Lakewood-based Harborstone Credit Union said it would acquire Burlington-based SaviBank.

The $1.5 billion-asset First Financial Northwest is the largest bank to announce a sale to a credit union this year. 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 that bank.

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. 

However, deals that involve credit unions are controversial. Bank trade groups have staunchly opposed the transactions, noting that credit unions are exempt from federal taxes. When they buy banks, credit unions effectively become banks but retain their special tax status, creating an unfair playing field, critics say. 

Industry groups "continue calling on Congress to hold hearings, request a Government Accountability Office study on the credit union industry, and consider an 'exit fee' on these acquisitions to capture the value of the tax revenue lost once the acquired bank's business activity becomes tax-exempt," Rebeca Romero Rainey, CEO of the Independent Community Bankers of America, said in an emailed statement.

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The pending acquisitions announced this year are subject to regulatory and bank shareholder approvals. Such approvals can prove difficult to secure. Several mergers have faced regulatory delays in recent years, owing in part to increased scrutiny of M&A imposed by the Biden administration. Some deals have been called off altogether.

With credit unions, members also have to sign off on deals, and that's not a sure thing either.

Just last week, Centra Credit Union in Columbus, Indiana, faced a vote over a plan to merge with in-state peer Hoosier Hills Credit Union in Bedford. Hoosier Hills' members rejected the deal, which was announced in January.

In a press release, the credit unions cited the dissemination of "misinformation" on social media, but did not provide specifics.

"Our members are dedicated ambassadors for Hoosier Hills Credit Union, and we appreciate their energy and passion. We will continue to find new and innovative ways to grow and deliver enhanced products and services now and into the future," Travis Markley, president and CEO of Hoosier Hills, said in the release.