Dive Brief:
- Newburgh, Indiana-based Heritage Federal Credit Union is acquiring the branches of The Elberfeld State Bank, the institutions announced last week, raising the number of deals this year in which a credit union has bought a bank to four in total.
- The deal, which is subject to approval by regulators and Elberfeld shareholders, is expected to close during the first quarter of 2021. Neither institution disclosed the purchase price.
- Including the Heritage-Elberfeld deal, the number of credit union-bank tie-ups so far this year stands at half what it was by this point in 2019, according to American Banker. The pace of such transactions had been accelerating — 16 were announced last year, compared with nine in 2018 — but trade groups such as the Independent Community Bankers of America (ICBA) have pushed back against the trend.
Dive Insight:
The coronavirus — and weigh-in from the judicial branch, in one case — has put a damper on bank takeovers by credit unions so far in 2020.
The pandemic in May scuttled Tampa, Florida-based Suncoast Credit Union's planned acquisition of Miami's Apollo Bank. "The COVID-19 virus changed the value of our agreement and left us with an unpredictable future," Suncoast CEO Kevin Johnson said, adding the two entities could revisit the merger once the pandemic is over.
Another deal was stifled in January, when the Colorado Banking Board rejected Elevations Credit Union's attempt to buy Cache Bank & Trust. Just days before the board was set to vote on the tie-up, the Colorado Bankers Association (CBA) wrote a letter arguing that credit unions can't be "authorized purchasers" of banks, according to language in state statutes.
The Heritage Elberfeld tie-up is the second such deal in the Hoosier State this year, following Crane Credit Union's proposed purchase of Community State Bank of Southwestern Indiana in June.
Tinker Federal Credit Union in Oklahoma City agreed in April to buy $285 million-asset Prime Bank of Edmond, Oklahoma.
Wings Financial Credit Union, based in Apple Valley, Minnesota, agreed in February to buy $224 million-asset Neighborhood National Bank.
With Elberfeld's assets, the $699 million-asset Heritage would have 13 branches in the Evansville area.
"Heritage’s strong consumer loan and mortgage loan business will nicely complement the extensive commercial loan business that the Bank has been so successful in building over the years," Heritage CEO David Milligan said in a press release.
The $82 million-asset Elberfeld's first-quarter earnings fell 38% from a year earlier, to $110,000, American Banker reported, citing Federal Deposit Insurance Corp. data. Heritage's net income fell by 7%, to about $1.1 million, in the same time frame.
The pandemic has "not killed but paused" bank takeovers by credit unions, Michael Bell, a lawyer at Howard & Howard in Royal Oak, Michigan, told Banking Dive in May.
"Depending on when [the outbreak] ends, I expect all of those things that are paused to heat right up," he said. "So either the end of this year will be really busy or 2021 will be busier than it was going to be."
The ICBA, which has critiqued the trend, launching a campaign last fall aimed at ending the acquisition of taxpaying banks by tax-exempt credit unions.
