August wave of deals doubles 2021 bank acquisitions by credit unions
Blink and the number of banks taken over by credit unions in 2021 has doubled.
Scott Credit Union, based in Edwardsville, Illinois announced Friday it would buy Tempo Bank, also from the Metro East region near St. Louis, for $ 14.25 million in a deal expected to be reached in the second quarter of 2022. It is the fifth acquisition of a bank by a credit union in the last 15 days. BBy comparison, five of these mergers were launched in the first half of 2021.
Illinois transaction comes a day after Orlando, Florida-based Fairwinds Credit Union announced Thursday it intends to acquire the Citizens Bank of Florida, based in Oviedo.
At least one mergers and acquisitions expert warned over a year ago that bank acquisitions by credit unions could return to the breakneck pace they took in early 2020 – before the pandemic of COVID-19 does not “suspend” them.
“Depending on the moment [the pandemic] ends, I expect all of these things that are on hiatus to heat up, ”Michael Bell, co-head of the Financial Institutions Practice Group at Honigman, told Banking Dive last year. “2021 will be busier than it was going to be. ”
The question is whether the wave of reconciliations announced this month is the result of talks that resumed once vaccinations brought an apparent return to normal, or whether a new wave of COVID-19 cases thanks to the delta variant will put another stop to trading. financial institutions are delaying previously planned large-scale office returns.
Financial terms of Thursday’s Fairwinds deal – which is expected to close in December, pending regulatory and shareholder approval – have not been released. But the motivation became clear: The purchase of Citizens Bank of Florida would give Fairwinds’ commercial loan portfolio an increase of more than 50%, from $ 387 million to over $ 600 million. The addition of the six branches of Citizens Bank of Florida also gives Fairwinds a 10.25% market share in Seminole County.
“As an organization with deep roots in Seminole County, Citizens Bank of Florida shares Fairwinds’ values of community engagement and putting our members and customers first,” said Larry Tobin, CEO of the credit union, in a press release.
Financial institutions teamed up last year to develop the Black Venture Fund, a non-profit organization meant to support non-white businesses.
“We are very confident that Fairwinds has the best interests of our customers in mind and will provide the exceptional service they deserve,” said Rick Lee, CEO of Citizens Bank of Florida, in Thursday’s press release. “I am also confident that Fairwinds will continue our efforts to support the communities in which we operate.”
In the Illinois agreement, geography seemed to be the focal point.
“We are excited about the opportunity to partner with Tempo Bank and improve access to our service in Clinton County,” Frank Padak, President and CEO of Scott Credit Union, said Friday in a statement. release, according to the St. Louis Business Journal. “Tempo Bank is a well-run bank and we believe its strong mortgage portfolio will benefit the credit union as we continue to move towards our goal of long-term growth. ”
The acquisition will carry Scott Credit Union’s imprint in the St. Louis area to 22 branches.
Once the transaction is completed, Tempo Bank will liquidate and distribute its remaining assets to its holding company, Sugar Creek Financial Corp. Sugar Creek will then dissolve and distribute its remaining assets to shareholders. Shareholders are expected to receive $ 14.50 to $ 16.50 in cash for each share of Sugar Creek.
Robert Stroh Jr., president, CEO and CFO of Tempo Bank and Sugar Creek, is expected to retire after the deal closes, American banker reported.
“Tempo Bank is proud of our long history of local ownership and operation, and we are delighted to join another local financial institution that shares the same sense of pride in the Eastern Metropolitan Area,” said Stroh in a press release Friday. “We know our clients will benefit from all the additional resources Scott Credit Union has to offer knowing that their money stays here in the community.”
Focus on Florida
Thursday’s deal would mark Fairwinds’ second bank purchase. (This acquired Friends Bank, with $ 95 million in assets, based in New Smyrna Beach, Fla., In October 2019.) The Fairwinds and Citizens merger would also be a bank’s third acquisition by a credit union this year in have a ripple effect in Florida.
The Grand Rapids, Mich.-Based Lake Michigan Credit Union agreed in June to buy Tampa-based Pilot Bank in a deal American banker estimated at nearly $ 100 million.
In late March, Jacksonville-based VyStar Credit Union announced plans to buy Georgia-based Heritage Southeast Bank for $ 195.7 million.
The Illinois and Florida moves come just over a week after Memphis, Tennessee-based Orion Federal Credit Union announced plans to acquire the Financial Federal Bank in a seal that would nearly double. the size of the credit union.
The deal was one of three announced over a seven-day period that also saw the Wisconsin-based company Royal Credit Union take over Minnesota-based Lake Area Bank and Alabama Credit Union to Tuscaloosa to buy the Security Federal Savings Bank in its home state.
The financial sector saw a record 16 banks bought by credit unions in 2019. That number fell to seven in 2020. But 2021 topped last year’s total amid the series of deals. August.
Credit unions’ purchases of banks typically meet with objections from business groups such as the Independent Community Bankers of America (ICBA), who argue that the tax-exempt status of credit unions allows them to offer a purchase price for acquisitions higher than banks can do, and allows them to develop more freely.
The VyStar deal, in particular, drew criticism in May from the ICBA and the Community Bankers Association of Georgia (CBA), whose executives wrote to the regional director of the Federal Deposit Insurance Corp. (FDIC), urging the regulator to reject the agreement.
“VyStar has either closed, moved, sold or consolidated half of the branches acquired in the Citizens State Bank transaction,” the trade groups wrote, referring to the credit union’s 2019 purchase of a bank based in Perry, Florida.
CBA President and CEO John McNair added that the merger “would significantly reduce Community Reinvestment Act loans and strengthen branch consolidation in Georgia, hurting low and moderate income consumers in our communities. “.
Other credit union-bank mergers were announced this year, including the twin decision of Iowa-based GreenState Credit Union to buy Illinois-based Oxford Bank & Trust and Nebraska-based Premier Bank. , and the January announcement from Minnesota-based Wings Financial Credit Union that it was buying Brainerd Savings & Loan.
Fairwinds has roughly $ 3.9 billion in assets, compared to $ 489 million for the Citizens Bank of Florida.
The Scott Credit Union of Illinois has about $ 1.5 billion in assets, according to American Banker.
Tempo Bank, by comparison, had $ 92.9 million in assets, $ 76.4 million in deposits and $ 10.5 million in equity as of June 30, the St. Louis Business Journal reported.