Waterloo, Iowa-based Veridian CU is entering Minnesota and skirting the state regulator's disdain for credit union-bank deals with its announced acquisition of American Investors Bank and Mortgage.
The credit union announced Dec. 6 that it plans to acquire the Eden Prairie, Minn.-based bank in the 12th such deal announced this year. Several states have barred credit unions from purchasing banks. The Minnesota Department of Commerce recently shut down a credit union acquisition of a Minnesota-based bank in April, which subsequently prompted a pending lawsuit.
However, Veridian CU is avoiding any such pushback from Minnesota state regulators by acquiring a federally chartered bank in a deal that will not require state approval.
The Veridian CU deal brings the total number of credit union acquisitions of banks in 2022 to 12, just shy of the yearly record of 13 such announcements in 2019, excluding terminations.
While credit unions are approaching a record year, the pace of their bank acquisitions has slowed since the first few months of the year, much like the pace of traditional bank M&A. The Veridian CU-American Investors deal is only the second credit union-bank acquisition announced in the fourth quarter and only the third since the second half of 2022.
Michael Bell, partner and co-leader of the financial institutions practice group at law firm Honigman LLP, which advised Veridian CU on this transaction, said one or two more deals could be announced before year-end.
Credit union buyers getting bigger
With $112.0 million in total assets, American Investors is the second-smallest bank target among the 12 acquisitions announced this year. Veridian CU, which has $6.71 billion in total assets, is the second-largest credit union to announce a bank transaction so far this year.
American Investors brings the total assets of bank targets involved in credit union transactions this year to $4.68 billion across 12 targets, above the previous record of $3.92 billion across 13 targets in 2019.
Further, the total average assets of the 12 banks selling to credit unions stands at $390.0 million this year, above the record high of $349.6 million across the 10 targets in 2021.
Friction in Minnesota
The deal marks the third M&A transaction involving a credit union and a Minnesota-based bank since 2015. The first of those three transactions was Royal CU's purchase of Saint Paul, Minn.-based Capital Bank, which was allowed to go through and closed in August 2016.
But when Wisconsin-based Royal CU announced its acquisition of Lindstrom, Minn.-based Lake Area Bank in August 2021, regulators objected to the transaction, forcing the credit union and bank to restructure the deal. In the end, Lake Area Bank sold its bank charter to another bank and sold certain branches and the bank's business banking and mortgage division to Royal CU. The credit union is now involved in a pending lawsuit, in which a handful of other credit unions and a credit union trade group have pushed back on the Minnesota financial regulator's decision to bar them from acquiring state-chartered banks.