Iowa credit union proposes buying Illinois, Nebraska banks

Dive Brief:

North Liberty, Iowa-based GreenState Credit Union is buying two banks — Oak Brook, Illinois-based Oxford Bank & Trust and Omaha-based Premier Bank, the credit union announced Tuesday.
The deals, each expected to close by the fourth quarter of 2021 — pending regulatory approval — mark the third and fourth banks to be bought by a credit union this year.
Credit union purchases of banks typically draw objections 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.

Dive Insight:

The COVID-19 pandemic presumably put a damper on what had been an acceleration in credit union-bank deals. Seven such acquisitions were made in 2020. That number stood at nine in 2018, and spiked to 16 in 2019.

Michael Bell, co-leader of the financial institutions practice group at Honigman, told Banking Dive last year that credit union-bank acquisition talks began 2020 at a torrid pace, but the pandemic "paused" them.

"Depending on when [the pandemic] ends, I expect all of those things that are paused to heat right up," said Bell, who has advised many credit unions on bank acquisitions, last May. He predicted at the time that "2021 will be busier than it was going to be."

GreenState’s acquisitions push the credit union’s 24-branch brick-and-mortar footprint outside Iowa for the first time — even though some of its 280,000 members are in neighboring states. Under Tuesday’s agreements, GreenState will buy all of the assets and branches of both banks. That includes Oxford’s six branches in Chicago’s western suburbs, and Premier’s four locations in Omaha and Nebraska City.

"Both banks have a strong legacy of providing quality service and demonstrating community involvement, and we are pleased to welcome them — and their customers — into the GreenState family," GreenState CEO Jeff Disterhoft said in a press release Tuesday.

Disterhoft said the banks’ strong financials and geographic locations made them appealing additions to the GreenState fold.

"We already serve more than 15,000 members in Illinois and Nebraska, so adding these new locations will not only strengthen our current cooperative, but it will also be a positive experience for these customers and the communities where they are located," he said.

The $7.5 billion-asset credit union did not detail the price it is offering for Oxford and Premier. The former counts $730 million in assets and holds $405 million in loans and $635 million in deposits, according to Tuesday’s press release; the latter has $345 million in assets, American Banker reported.

"Oxford Bank customers will work with the same familiar faces at the same locations, only now with a greatly expanded menu of products to meet their diverse financial needs," the bank’s chairman, George Colis, said Tuesday, according to American Banker.

Premier Bank CEO Chris Maher also touted a wider array of products and services as a benefit to linking up with GreenState.

The Oxford and Premier tie-ups aren’t GreenState’s first deals with banks. The credit union announced in 2019 it would buy seven branches and related assets from Fort Dodge, Iowa-based First American Bank. The Iowa Division of Banking questioned the deal in March 2020, saying it hadn’t yet given its approval by the time the financial institutions finalized the transaction. The regulator and First American settled the dispute days later, allowing the deal to proceed.

Tuesday’s GreenState purchases follow two other announced acquisitions of banks by credit unions this year: Wings Financial Credit Union’s purchase of Brainerd Savings & Loan in Minnesota, a deal that was scheduled to close by this week; and Jacksonville, Florida-based VyStar Credit Union’s proposed March deal to buy Jonesboro, Georgia-based Heritage Southeast Bank for $195.7 million.

The latter drew rebukes this month from the ICBA and the Community Bankers Association of Georgia, whose leaders wrote the regional director of the Federal Deposit Insurance Corp. (FDIC), urging the regulator to reject the VyStar 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 the 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."

American Bankers Association President Rob Nichols, in a letter this month to the leaders of the House Financial Services and Senate Banking Committees, said VyStar’s transaction "highlights in stark terms the changing face of the nearly $2 trillion credit union industry."

"Over the years, several growth-oriented credit unions have become indistinguishable from traditional tax-paying banks — while continuing to enjoy an exemption from federal and most state income taxes, lighter regulation, and no federal community reinvestment obligations to support the needs of low- and moderate-income communities," he wrote.