UPDATE: April 4, 2022: VyStar Credit Union’s takeover of Heritage Southeast Bank has been postponed for a third time, Heritage announced Thursday.
The two financial institutions mutually agreed to extend the timeline of the deal from March 31 to June 30 after consideration of the proposed transaction and the status of necessary regulatory approvals, the bank said.
The tie-up, which was announced in March 2021, was first delayed in October, when both parties agreed to postpone the transaction from December to February. The deal’s deadline was pushed back a second time to March 31.
Heritage CEO Leonard Moreland, in a statement Thursday, said the acquisition "remains a priority."
"Our primary focus has always been on achieving the best results for our shareholders through offering the best products and services throughout our footprint," he said. "Our dedicated employees come to work each and every day to help achieve our mission. The combination of Heritage Southeast Bank with VyStar allows us to continue that strategy."
Dive Brief:
- VyStar Credit Union and Heritage Southeast Bank agreed to postpone — from Dec. 31 to Feb. 28 — the date by which they can terminate the proposed deal between them, Heritage announced Friday.
- Heritage said VyStar and the $1.5 billion-asset bank still need regulatory approvals from the Federal Deposit Insurance Corp. (FDIC), the National Credit Union Administration (NCUA), the Georgia Department of Banking and Finance and the Florida Office of Financial Regulation.
- The VyStar-Heritage deal is just one of several transactions delayed or otherwise affected over the past few weeks by slower-than-expected response from regulators. First Citizens BancShares and CIT Group extended the timeline to complete their $2.2 billion merger until March 1 after they said the Federal Reserve had not signed off on their deal. Green Dot called off its proposed acquisition of Republic Bank's tax processing unit after it said it was unable to get the Fed's approval or non-objection to the deal. Republic has sued.
Dive Insight:
VyStar and Heritage said they mutually decided to extend the time period to obtain regulatory approvals, satisfy other closing conditions and prepare for a smooth transition of the Georgia-based bank's business to the $11 billion-asset credit union.
"While the parties continue to work toward closing the proposed business combination in 2021, the parties recognize that the timing of regulatory approval and customer notifications may result in the closing of the transaction occurring during the first quarter of 2022," Heritage said in a statement.
Per the terms of the deal, VyStar will pay Heritage an aggregate amount estimated to provide Heritage with sufficient cash to have $27 per share available to distribute to its shareholders after all of Heritage’s unconsolidated debt and other obligations are satisfied, the bank said.
The aggregate purchase price paid by VyStar to Heritage will increase by an amount equal to Heritage’s consolidated net profit, after certain deductions, for each month from Oct. 1 through the closing date, Heritage said.
With Friday's announcement, the VyStar-Heritage deal became the second transaction within a week to be delayed. New York Community Bank said Wednesday it doesn't expect its $2.6 billion acquisition of Michigan-based Flagstar Bank will get state and federal regulators’ approval before the end of the year as it initially hoped, according to American Banker.
That deal, announced in April, must receive sign-off from the New York Department of Financial Services, the FDIC and the Fed. CEO Thomas Cangemi said he now expects the transaction to be finalized sometime next year.
The $195.7 million Heritage deal, also announced in April, would make Jacksonville, Florida-based VyStar the 13th-largest credit union in the U.S., with $12.5 billion total assets, 88 branches and more than 850,000 members.
Bank trade groups have long pushed back against credit union-bank tie-ups, and have taken particular issue with the VyStar-Heritage deal because of its size and VyStar’s history of branch consolidation.
"VyStar has either closed, moved, sold or consolidated half of the branches acquired from the Citizens State Bank transaction," the Independent Community Bankers of America (ICBA) and the Community Bankers Association of Georgia wrote in a joint letter in May, referencing the credit union's 2019 purchase of the Perry, Florida-based bank.
In a letter to the leaders of the House Financial Services and Senate Banking committees, American Bankers Association (ABA) President Rob Nichols said the proposed VyStar deal "highlights in stark terms the changing face of the nearly $2 trillion credit union industry."
Nichols called for members of Congress to review credit unions’ tax-exempt status and determine whether credit union acquisitions of banks meet the public policy goals Congress intended.
"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.
VyStar’s Heritage deal would be the credit union’s first purchase of a bank since it acquired $280 million-asset Citizens State Bank in August 2019. There have been 12 credit union purchases of banks so far this year — five more than in 2020, but short of the record 16 deals notched in 2019.
