Credit union-bank M&A comes back to life with record-breaking deals

Recent credit union purchases of banks could be a precursor of more to come, much to banking industry groups' dismay.

Less than two months after Jacksonville, Fla.-based VyStar CU announced the largest ever bank purchase by a credit union, North Liberty, Iowa-based GreenState CU announced its acquisitions of Oak Brook, Ill.-based Oxford Bank & Trust and Omaha, Neb.-based Premier Bank, marking the first time a credit union struck two bank deals at once.

GreenState CU's deals mark only the third and fourth bank acquisitions announced by credit unions in 2021, but credit union-bank deals could soon pick up and rival the record amount of 14 such deals in 2019. At the onset of the pandemic, both buyers and sellers pulled back, but now interest is escalating, according to Michael Bell, partner and co-leader of the financial institutions practice group at Honigman LLP.

"Two, three or four months ago [credit union buyers] came back like, Hey, Mike, this wasn't what we thought it was. We'd like to buy right now. And that's what happened with sellers too," he said.

Bell said he is working on 10 credit union buys of whole banks or bank branches. "And there's plenty of others that are in some early stages or something, but I mean there's a good 10 real active somewhere along the line, not all guaranteed to finish, but we're in the middle of them spending time and money," he said.

While recent credit union-bank deals have been record-breaking and riled banking industry groups, Bell said, the deals in his current pipeline are up and down the size spectrum.

With its May 25 announcement, GreenState CU is now the second credit union to have announced at least three bank acquisitions. Another Midwest credit union, Parchment, Mich.-based Advia CU, has also announced three bank acquisitions.

With its three announced deals, GreenState CU holds the second and third spot for largest bank targets based on total assets at the time of announcement. Its acquisition of Fort Dodge, Iowa-based First American Bank was the largest bank acquisition by a credit union when it was announced in June 2019, but it was bumped into second place when VyStar CU announced its acquisition of Jonesboro, Ga.-based Heritage Southeast Bancorp., which has $1.65 billion in total assets at March 31, two months ago. First American Bank had $959.3 million in total assets when the deal was announced, but when the deal closed, the bank had $675.0 million in total assets.

GreenState CU's announced acquisition of Oxford Bank & Trust is the third-largest bank target at announcement in a credit union-bank deal. Oxford Bank & Trust had $759.4 million in total assets as of March 31.