Dive Brief:

• Dubuque, Iowa-based Dupaco Community Credit Union has agreed to buy Madison, Wisconsin-based Home Savings Bank in an all-cash transaction expected to close during the second quarter of 2022, the institutions announced Friday.
• The total value of the transaction was not disclosed, but Home Savings Bank, in a press release, said its stockholders would receive between $26.47 and $27.32 in cash consideration for each of the Home Bancorp shares.
• Home Savings would be the 11th bank acquired this year by a credit union. That’s up from seven in 2020 but still below the record 16 purchased in 2019.

Dive Insight:

Acquiring Home Savings Bank would expand Dupaco’s branch footprint into Madison, the credit union said. The bank’s two branches would push Dupaco’s total to 20, and its $183 million in assets would give Dupaco about $2.8 billion altogether.

Combining with a larger organization was the best strategy to serve the bank’s stakeholders amid a competitive marketplace demanding an ever-expanding set of services, said Jim Bradley Jr., Home Bancorp Wisconsin’s CEO.

"For the majority of our 125-year history, Home Savings Bank was structured as a mutual institution, with a focus on serving our members and our community," Bradley said. "We’re excited about the opportunity to return to those roots as a credit union."

Friday’s tie-up marks the first proposed acquisition of a bank by a credit union since five such deals were announced over a stretch of just more than two weeks in August. On successive days, Orlando, Florida-based Fairwinds Credit Union announced it would buy Oviedo-based Citizens Bank of Florida, and Illinois-based Scott Credit Union said it would acquire another St. Louis-area institution, Tempo Bank.

Three other deals — Memphis, Tennessee-based Orion Federal Credit Union’s proposed acquisition of Financial Federal Bank; Wisconsin-based Royal Credit Union’s purchase of Minnesota-based Lake Area Bank, and Alabama Credit Union’s move to buy Security Federal Savings Bank — came in a seven-day span.

At least one mergers-and-acquisition expert warned more than a year ago that bank acquisitions by credit unions may snap back to the torrid pace they took as 2020 began — before the COVID-19 pandemic "paused" them.

"Depending on when [the pandemic] ends, I expect all of those things that are paused to heat right up," Michael Bell, co-leader of the financial institutions practice group at Honigman, told Banking Dive last year. "2021 will be busier than it was going to be."

But 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.

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."

Other credit union-bank tie-ups announced this year include Iowa-based GreenState Credit Union’s twin May moves to buy Illinois-based Oxford Bank & Trust and Nebraska-based Premier Bank; Michigan-based Lake Michigan Credit Union’s $100 million deal to buy Tampa-based Pilot Bank; and Minnesota-based Wings Financial Credit Union’s January announcement that it would purchase Brainerd Savings & Loan.

The Dupaco-Home Savings deal still requires approval from the latter’s stockholders, as well as regulators.