Wisconsin credit union targets Illinois bank in 6th such tie-up of 2022

Dive Brief:

Antigo, Wisconsin-based CoVantage Credit Union has agreed to buy substantially all of New Lenox, Illinois-based LincolnWay Community Bank's assets and liabilities, it said Wednesday in a press release.
Financial terms of the deal, expected to close in the fourth quarter of 2022, were not disclosed. The transaction would be the sixth tie-up between a bank and credit union to be announced this year.
LincolnWay's $277 million in assets is expected to push CoVantage's asset total to the $3 billion threshold, and give the credit union a presence within an hour of Chicago — a popular target market for expansion.

Dive Insight:

CoVantage CEO Charlie Zanayed cited LincolnWay's success in commercial development and real estate lending as a net positive for the credit union in the deal.

"By partnering with LincolnWay Community businesses, we can deliver the size and scale that is needed to survive and thrive today," Zanayed said. “CoVantage is also a leading mortgage lender throughout the communities we serve. ... We feel this is an opportune time to provide outstanding value and exceptional service to Northern Illinois.”

Chicago has served as a selling point for both banks and credit unions seeking to grow their footprint. Iowa-based GreenState Credit Union deepened its push into the nation's third-largest market in October, agreeing to buy Midwest Community Bank and its subsidiary, Blueleaf Lending.

Evansville, Indiana-based Old National Bank in February completed its $2.5 billion merger with First Midwest Bank, giving it a toehold in the Windy City.

Trade groups such as the Independent Community Bankers of America (ICBA) continue to argue that credit unions’ tax-exempt status allows them to offer a higher purchase price in acquisitions than banks can, and lets them grow more freely.

Michael Bell, co-leader of the financial institutions practice group at the law firm Honigman, predicted in January that the banking sphere could see "25-plus" deals between credit unions and banks in 2022. A record 16 banks were bought by credit unions in 2019. At the current rate, 2022 would see 18 or 19 — enough to set a new high but not nearly 25.

Credit union-bank tie-ups have tapered off in recent weeks after a flurry of activity in February and March. A trio of Southeast-focused deals kicked off this year's spree — two in Georgia and one between a Louisiana credit union and an Arkansas bank. But the space has been relatively quiet since Phoenix-based Arizona Federal Credit Union said it would acquire Horizon Community Bank, based in Lake Havasu City, last month.

CoVantage operates 19 branches throughout Wisconsin and the Upper Peninsula of Michigan. The deal would bring LincolnWay's two branches just south of Chicago into the credit union's fold.

It would mark CoVantage's first acquisition of a bank. But Wisconsin has been ripe for activity on both sides of the acquisition spectrum. Madison-based Summit Credit Union said in March it would acquire West Bend-based Commerce State Bank in this year's fourth credit union-bank deal.

LincolnWay would be the seventh community bank in Illinois to be bought by a credit union in the past few years, Randy Hultgen, president and CEO of the Illinois Bankers Association, told American Banker.

“Congress should tax large credit unions over $500 million in assets, and federal credit unions should comply with federal [Community Reinvestment Act] requirements to demonstrate that they aren’t abandoning Illinois communities,” Hultgen wrote in an email to the outlet.