Dive Brief:

• Memphis, Tennessee-based Orion Federal Credit Union plans to acquire Financial Federal Bank in an all-cash transaction, the credit union announced on Wednesday, according to the Memphis Business Journal.

• The deal, which would nearly double the $1 billion-asset Orion Federal’s size, is the seventh such deal involving a credit union purchasing a bank to be announced this year, according to American Banker. 

• The acquisition, which is subject to approval by the National Credit Union Administration (NCUA) and Federal Deposit Insurance Corp.(FDIC), would bring Orion Federal’s deposits to close to $1.7 billion, according to NCUA and FDIC data, and increase its employee count to 200. Financial terms of the deal were not released.

Dive Insight:

"This transaction positions Orion to be a fierce competitor in the Southeastern region in both the commercial and consumer banking spaces," Andre Fowlkes, Orion Federal's chairman of the board, said in a statement. "The partnership is a win for employees and the business community and will position us to deliver on even greater community outreach activities throughout the City of Memphis."

The credit union said the deal will create an entity that combines Orion Federal’s consumer banking expertise with Financial Federal’s commercial banking niche. 

"We believe that the combination of these two great organizations produces undeniable synergies," Ashley McAdams, Orion’s executive vice president and CFO, said in a statement. "Orion has a legacy of exceptional consumer banking, while Financial Federal has a specialized niche in the commercial banking space."

McAdams said aligning the two organizations would bring "depth and bench strength" to the credit union’s commercial real estate lending team while supporting its goal to grow its mortgage product lines as well as expand into commercial and industrial lending.

"I am enthusiastic about the opportunity we have to partner with Orion in a transaction that we believe offers significant opportunities to our clients, communities, employees, and shareholders," Financial Federal CEO Kent Wunderlich said in a statement. "This partnership is an excellent opportunity to create value for both institutions."

After a record 16 credit union acquisitions of community banks were announced in 2019, that momentum slowed to just seven amid the pandemic last year.

The slowdown, however, hasn’t quelled criticism of such deals from trade groups the Independent Community Bankers of America (ICBA) and the American Bankers Association (ABA), which argue the tie-ups are the result of credit unions’ exploiting their tax-exempt status.

"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," ABA President Rob Nichols wrote to lawmakers in May in response to Jacksonville, Florida-based VyStar Credit Union’s plans to purchase Jonesboro, Georgia-based Heritage Southeast Bank for $195.7 million.