Dive Brief:
- Richland, Washington-based Gesa Credit Union plans to acquire Centralia, Washington-based Security State Bank, the institutions announced Thursday in a press release.
- The deal, expected to be completed next year, marks the fourth time in 2024 that a credit union has said it would buy a bank headquartered in the Evergreen State.
- The purchase price was not disclosed, but the deal will add 12 branches in Lewis, Thurston, Pacific and Grays Harbor counties to Gesa’s 31-location footprint.
Dive Insight:
Gesa Credit Union’s deal comes on the heels of three other credit union-bank tie-ups with Washington state connections. Anchorage, Alaska-based Global Federal Credit Union said in January it would buy Renton-based First Financial Northwest Bank. Tacoma-based Sound Credit Union announced in March it plans to acquire Olympia-based Washington Business Bank. And Lakewood-based Harborstone Credit Union said days later that it would acquire Burlington-based SaviBank.
Geography aside, Security State is one of the largest banks to be acquired by a credit union, at more than $606 million in assets. (Gesa, by comparison, counts $5.5 billion.)
The largest bank involved in a credit union deal last year was New Mexico’s $338 million-asset Western Heritage Bank. But so far in 2024, five banks larger than Western Heritage have announced sales to credit unions — the biggest being First Financial Northwest.
Jeff Cardone, a partner at Luse Gorman who served as legal counsel to Gesa in the deal, told Banking Dive the biggest difference driving credit union-bank deals this year is that — given bank stock values, the interest rate environment and regulatory challenges — there are fewer bank buyers and, as a result, credit unions have filled the gap.
“The reason banks are larger [in 2024] is two-fold,” Cardone said. “Credit unions are the only realistic buyers that could pay cash and absorb the bank’s balance sheet from a purchase accounting standpoint, and the geography for these deals — [primarily] the Pacific Northwest and Florida — have larger bank targets than other market areas, such as the Midwest, which is [composed] of a significant number of small community banks.”
The Independent Community Bankers of America has long opposed credit unions buying banks. In a February post on X, formerly Twitter, the trade group said 20% of bank acquisitions “are now by tax-subsidized credit unions, and each one increases the portion of the financial services industry exempt from [the Community Reinvestment Act] and taxation.”
The Gesa deal marks the 10th proposed purchase of a whole bank by a credit union this year. Eleven credit union-bank tie ups were reached in all of 2023, by comparison. And 2024 appears on pace to shatter the record 16 such deals announced in 2022.
On top of that, the sector has seen three partial-bank acquisitions by credit unions in 2024.
Don Miller, Gesa’s CEO, said Thursday the agreement will act as a catalyst for the credit union to continue to expand its footprint and service in the Pacific Northwest.
"Both Gesa and Security State Bank have shared the same values for over 70 years, with an unwavering dedication to the communities we serve,” Miller said.
Dwayne Aberle, president of Security State Bank, said partnering with Gesa will bring expanded products, services, locations and offerings to its customers and employees.
“In today's ever-increasingly competitive banking environment, we feel that this transaction will provide uncountable benefits to these same communities, customers and employees that we have dedicated our long tenure to, and we thank them all for that trust that they have placed in us over all these years,” Aberle said.
Once the deal is complete, Security State Corp. and Security State Bank will each dissolve, and the corporation will distribute its remaining assets to its shareholders.
