Dive Brief:

• Birmingham, Alabama-based Avadian Credit Union agreed Friday to buy Citizens State Bank, a two-location, $85 million-asset community bank based in Vernon, 95 miles west, according to the Birmingham Business Journal.
• The value of the all-cash purchase and assumption was not disclosed, but the deal is expected to close by the third quarter of 2022.
• The tie-up marks the 13th acquisition of a bank by a credit union in 2021 — surpassing the seven such deals struck in 2020 but falling short of 2019’s record of 16.

Dive Insight:

Continued credit union encroachment on the community banking space has generated consistent pushback from trade groups such as the Independent Community Bankers of America (ICBA), which argues credit unions’ tax-exempt status allows them to offer a higher purchase price for acquisitions than banks can, and lets them grow more freely.

Avadian — which, after the transaction, will count 19 locations and $1.2 billion in assets — said Citizens State Bank's geographic position lets the credit union push into western Alabama.

“We are delighted to partner with Citizens State Bank, especially as they share our focus on running a high-quality, low-risk institution with a strong commitment to both the community and to our members and customers,” Linda Cencula, Avadian's president and CEO, said in a statement.

Anthony Burnett, Citizens State Bank's president and CEO, called the deal "an attractive fit for our bank offering a comprehensive set of products and services to our customers and an expanded geographic diversification." 

Michael Bell, co-leader of the financial institutions practice group at Honigman, told CUToday he thought the Avadian deal would be the last credit union-bank tie-up to be announced this year.

"But there are quite a few behind it ready to be announced in 2022," he said. "The marketplace is the most active I have seen in my career."

He told Banking Dive in 2020 that a pause in deals, precipitated by the COVID-19 pandemic, geared 2021 up to be busier than it might have been otherwise.

Avadian isn't the only credit union to buy an Alabama bank this year. Tuscaloosa-based Alabama Credit Union in August said it would purchase Security Federal Savings Bank, based in Jasper, a community also west of Birmingham.

That deal was one of five announced over a span of just more than two weeks, including Illinois-based Scott Credit Union acquisition of Tempo Bank in the St. Louis area; Orlando-based Fairwinds Credit Union's purchase of Citizens Bank of Florida; and Wisconsin-based Royal Credit Union's deal for Minnesota's Lake Area Bank.

Memphis, Tennessee-based Orion Federal Credit Union also announced its intention to buy Financial Federal Bank in that time frame. That deal, however, is held up in court as a state regulator, the Tennessee Department of Financial Institutions, argues the word "acquire" as defined in the Tennessee Banking Act, limits the scope of a bank acquisition to its stock and charter and would forbid the assumption of assets. The financial institutions, however, argue the Tennessee Banking Act doesn't explicitly define "acquire" and that a less ambiguous source needs to be used. 

Davidson County Chancery Court Judge Patricia Moskal ordered a "speedy hearing" to resolve legal and interpretive uncertainties but cited "the need to maintain the status quo during the pendency of this action."

That's not the only challenge to a credit union's proposed purchase of a bank this year. 

Jacksonville, Florida-based VyStar Credit Union’s move in late March to buy Georgia-based Heritage Southeast Bank for $195.7 million, drew rebukes in May from the ICBA and the Community Bankers Association of Georgia (CBA), whose leaders wrote the regional director of the Federal Deposit Insurance Corp. (FDIC), urging the regulator to reject the deal.

"VyStar has either closed, moved, sold or consolidated half of the branches acquired from the Citizens State Bank transaction," the trade groups wrote, referencing the credit union's 2019 purchase of a Perry, Florida-based bank.

CBA President and CEO John McNair added that the tie-up would "substantially decrease Community Reinvestment Act loans and further branch consolidation in Georgia, harming low- and moderate-income consumers in our communities."

One credit union stood out as more prolific than others in 2021: Iowa-based GreenState announced its intention to buy three banks. Two, the May acquisition of Oak Brook, Illinois-based Oxford Bank & Trust and an October deal for Midwest Community Bank, would push the credit union into Chicago and its suburbs. A third, the May acquisition of Nebraska's Premier Bank, would give the credit union a presence in the Omaha market.

Minnesota-based Wings Financial Credit Union kicked off the year with a January move to purchase Brainerd Savings & Loan. Others followed, such as Michigan-based Lake Michigan Credit Union's $100 million June deal to buy Tampa, Florida-based Pilot Bank, and Iowa-based Dupaco Community Credit Union's push into Madison, Wisconsin, with a September purchase of Home Savings Bank.