When VyStar CU agreed to acquire the assets of Perry, Fla.-based Citizens State Bank, it marked the first deal of the new year involving a credit union buying a bank. At closing, the deal would be the largest U.S. credit union ever to buy a community bank, according to S&P Global Market Intelligence data.
Jacksonville, Fla.-based VyStar is the 17th-largest credit union in the country, with $8.06 billion in assets as of Sept. 30, 2018. VyStar President and CEO Brian Wolfburg said in a July 2018 interview that the credit union planned to look for more M&A opportunities as it marches toward $10 billion in assets.
Prior to the VyStar deal, the largest credit union to acquire a bank was Lake Michigan CU with close to $6 billion in assets.
U.S. credit unions announced nine deals to acquire banks in 2018. There were six credit union-buying-bank deals announced in 2017, although one of those was later terminated.
Dennis Holthaus, managing director at boutique investment bank Skyway Capital Markets, said many credit unions now have excess capital and are eager to deploy it through growth strategies, including M&A. "It can be deployed organically, but the cost of organic growth is going up on the deposit side without loan rates necessarily keeping pace, resulting in more credit unions looking to grow through mergers," said Holthaus, who has advised on several credit union-bank deals, including VyStar's Citizens State Bank deal.
Holthaus pointed to positive economic trends in the Southeast and said that momentum is improving the value of community bank franchises, which in turn is motivating community bank boards and management teams to explore the possibility of selling. Michael Bell, an attorney with Howard & Howard, said the Southeast in general and Florida, in particular, are very active spots for credit union-bank deal talks.
Bell has advised buyers in many deals involving credit unions buying banks, including the VyStar transaction. He expects that many more such announcements will be coming soon and predicted that 2019 should surpass 2018 in terms of the number of deals. The next credit union-bank deal will likely be announced as soon as the end of January, according to Bell.
"I have a couple competing for the next announcement, and I'm not sure which will be first," Bell said in an interview.