NY credit union-bank tie-up pushes 2024 to brink of M&A record

Dive Brief:

Rochester, New York-based ESL Federal Credit Union has agreed to acquire Seneca Falls-based Generations Bancorp in an all-cash transaction valued at $26.2 million — marking the 16th proposed whole-bank purchase by a credit union this year, tying 2022 for the most ever.
The transaction — expected to close in the second or third quarter of 2025 — will boost ESL Federal Credit Union’s assets to roughly $9.6 billion and increase its footprint to more than 30 full-service branches throughout Greater Rochester and the Finger Lakes.
Following the completion of the transaction, announced Tuesday, Generations Bank will liquidate, and its parent company, Generations Bancorp, will distribute its assets to its shareholders, likely in two separate payments, the company said.

Dive Insight:

“ESL has been focused on growth and felt this to be a natural fit given both organizations’ focus on serving their communities, customers, and employees,” Rich Pulvino, ESL’s director of marketing and corporate communications, told Banking Dive in an email.

Generations’ shareholders are estimated to receive between $18 and $20 in cash in exchange for every share of Generations Bancorp common stock. It has 2,241,801 outstanding shares of common stock. The payment will be made in two installments, with most of the total shares expected to be distributed within six to nine months following the deal, and the balance of the per share consideration will be distributed six to nine months after the first one is paid.

ESL is purchasing all Generations Bank branches and has no plans to close branch locations, Pulvino said. Upon closing the deal, the Generations name would be retired and the branches would carry the ESL Federal Credit Union name, he said.

Pulvino did not say whether Generations’ leadership team would stay after the completion of the deal and declined to say anything further, but he did say ESL needs all customer-facing staff to continue their work.

“We have a lot to learn about Generations operations to determine whether we have a long-term need for certain positions, either in their current location or elsewhere at ESL, subject to our normal hiring practices,” he said.

ESL Federal Credit Union, founded in 1920, counts $9.2 billion in assets and more than 429,000 members, it said. The acquisition aims to expand its presence throughout Seneca, Cayuga, and Orleans counties and grow its footprint in Ontario County.

“We look forward to our future as a stronger, growing financial institution, and bringing the superior experiences we are known for to employees and customers in new communities,” Faheem Masood, CEO of ESL Federal Credit Union, said in a statement.

Generations Bank, established in 1870, has nine retail locations in Seneca Falls, Auburn, Union Springs, Waterloo, Geneva, Phelps, Farmington and Medina.on

The lender announced its decision to delist its common stock from Nasdaq and its intent to deregister its common stock with the Securities and Exchange Commission Tuesday. Generations Bancorp must pay ESL Federal Credit Union $1.64 million if the deal falls through, according to an SEC filing on Monday.

“The synergy created by combining these two companies coupled with the financial strength of the combined institution will assure that our customers, our employees and our communities have expanded financial services and membership benefits going forward,” Angela Krezmer, CEO of Generations Bank, said in a statement.

The deal was approved by the boards of directors of both companies but awaits approvals from Generation Bancorp shareholders and regulatory approvals.

The recent uptick in credit union-bank tie-ups has irked trade groups like the Independent Community Bankers of America, who argue that credit unions’ tax-exempt status allows them to offer higher purchase prices than banks.

Beyond the 16 whole-bank deals so far this year, there have been three others in which credit unions took on part of a bank’s footprint.

Michael Bell, a partner at the law firm Honigman, told Banking Dive he expects the 17th deal to be announced next week.

While Bell expects the record pace to continue, changing consumer behavior has affected mergers and acquisitions in the financial sector, he said.

“I think scale and capabilities matter. Consumers want a full product suite, robust fraud protection, and digital capabilities,” Bell said in an email.