Linkbancorp selling New Jersey operations to credit union

Delmas Lehman - Fotolia

Just months after it merged with a Maryland bank and more than doubled in size, Linkbancorp in Camp Hill, Pennsylvania, said Friday it would sell its New Jersey banking operations to a credit union.

The $2.8 billion-asset Linkbancorp said that the $4.9 billion-asset American Heritage Federal Credit Union in Philadelphia would acquire its three branches in New Jersey and approximately $105 million of deposits and $123 million of loans. The branches were previously part of a division of The Bank of Delmarva, which Linkbancorp acquired when it merged with Partners Bancorp in Salisbury, Maryland, in November.

"As we continue to execute on initiatives to achieve the operational efficiencies and revenue growth of the Partners combination, we believe this divestiture will enable us to reallocate capital toward our core Pennsylvania markets and accelerate growth in the robust Northern Virginia and Maryland markets," Linkbancorp CEO Andrew Samuel said in a release announcing the deal.

The transaction is expected to close in the second half of 2024. Financial terms were not disclosed.

When Linkbancorp announced its merger with Partners last year, Samuel said the deal would drive strong earnings accretion, add substantial scale and expand the company's footprint to include major markets such as Baltimore and metropolitan Washington, D.C.

Notably, Partners had previously tried to sell itself to OceanFirst Financial in New Jersey, but the deal was called off in 2022 because of hurdles to securing regulatory approvals.

Linkbancorp's branch sale to a credit union follows similar deals in recent months.

Earlier this year, All In Credit Union in Daleville, Alabama, said it has agreed to acquire five branches from Louisville, Alabama-based 22nd State Bank, and Poughkeepsie, New York-based Hudson Valley Credit Union said it agreed to buy eight branches from Berkshire Bank in Pittsfield, Massachusetts.

Banks are also increasingly selling to credit unions that are pursuing geographic and business line diversity through M&A. Most recently, Texas Dow Employees Credit Union in Houston said this month it plans to buy Sabine State Bank and Trust in Many, Louisiana. to diversify and expand its commercial lending capabilities, especially in oil and gas.

The TDECU-Sabine deal marked 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. 

More small banks are selling to both larger banks and to credit unions because many do not have the scale needed to manage high regulatory costs and digital banking expenses.

But the deals that involve credit unions as the buyer are controversial. The Independent Community Bankers of America and other bank advocacy groups have lobbied against the transactions. They argue that credit unions are exempt from federal taxes because they are supposed to focus on underserved niches. When they buy banks, critics say, credit unions effectively become banks while retaining nonprofit status. 

After the TDECU-Sabine deal was announced, ICBA President and CEO Rebeca Romero Rainey emphasized that communities lose tax-paying banks after credit unions buy them out.

"This trend is a matter of federal policy and national economic importance, and Congress should respond by holding hearings, requesting a Government Accountability Office study on the credit union industry, and considering 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," Romero Rainey said.

For its part, Linkbancorp is largely built on M&A.

Samuel formed Linkbancorp in 2018 to serve central and southeastern Pennsylvania. He founded the company after raising more than $40 million and buying Stonebridge Bank, a single-branch institution in New Hope, Pennsylvania, in October 2018.

The company in 2021 acquired the $437 million-asset GNB Financial Service in Gratz, Pennsylvania. The deal was valued at $62.7 million when it was announced.