Dive Brief:

• Grand Rapids, Michigan-based Lake Michigan Credit Union agreed Thursday to buy Tampa, Florida-based Pilot Bank in what would become the fifth purchase of a bank by a credit union in 2021.
• The deal, expected to close in the fourth quarter, pending regulatory approval, would give Pilot shareholders $6.25 in cash per share — a transaction that would total nearly $97 million, based on the bank’s outstanding shares as of Feb. 12, according to American Banker. Pilot Bank CEO Roy Hellwege told the publication that figure would jump to about $100 million when stock options are considered.
• Pilot’s six branches — four in Tampa, one in St. Petersburg and one in Lakeland — would give Lake Michigan a 19-branch Florida footprint. The credit union has been steadily expanding in the Sunshine State; it acquired Naples-based Encore Bank in 2018.

Dive Insight:

It was Encore Bank’s former CEO, Tom Ray, who introduced Pilot to Lake Michigan in 2019, Hellwege told American Banker. Pilot "had never been formally for sale," he said, but the institutions opened discussions. However, the COVID-19 pandemic put them on hold.

That tracks with a prediction Michael Bell, co-leader of the financial institutions practice group at Honigman, gave Banking Dive last year. Credit union-bank acquisition talks began 2020 at a torrid pace, he said, 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 advised Lake Michigan in the Encore deal. He said in May 2020 that "2021 will be busier than it was going to be."

Indeed, with the year nearly half complete, the industry is on pace to see 10 bank acquisitions by credit unions in 2021. That would be an uptick from last year’s seven.

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.

Florida Bankers Association CEO Alex Sanchez called the Lake Michigan-Pilot deal "an act of hypocrisy" Thursday.

"Congress never intended for the Lake Michigan Credit Union to use its tax exemption to expand into some of the most affluent markets in the country," Sanchez told American Banker.

Credit unions bought 16 banks in 2019, marking a peak for the trend, which had seen nine a year earlier.

"This is another step in our plan to enhance our member value and experience for our many wonderful members that live in or vacation in Florida, including those in this new thriving market, as well as future new members," Lake Michigan Credit Union CEO Sandy Jelinski said in a press release Thursday.

Lake Michigan Credit Union was founded in 1933 to serve teachers in Grand Rapids and has grown into a 500,000-member, $11 billion-asset (counting Pilot) institution focused on residential and consumer lending. The $656 million-asset Pilot Bank launched in 1987 and has a strong concentration on aircraft financing and Small Business Administration loans.

Once the transaction is complete, Hellwege will become Lake Michigan’s Central Florida market president, according to Thursday’s press release. National Aircraft Finance Co. President Kevin Buckland will become president for aircraft finance at Lake Michigan.

"Given the shared values of Pilot Bank and Lake Michigan Credit Union, we have no doubt that this is an outstanding outcome for all concerned parties," Hellwege said.

Credit unions have moved to acquire four other banks so far this year. Iowa-based GreenState Credit Union announced last month it would buy Illinois-based Oxford Bank & Trust and Nebraska-based Premier Bank.

Jacksonville, Florida-based VyStar Credit Union announced its intention in late March to buy Georgia-based Heritage Southeast Bank for $195.7 million — a transaction that 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."

Minnesota-based Wings Financial Credit Union said in January it would purchase Brainerd Savings & Loan.