As it turns out, 2022 tied the record for most proposed acquisitions of banks by credit unions.
Decatur, Illinois-based Land of Lincoln Credit Union announced its intention to buy Colchester State Bank late last month — marking the 16th credit union-bank tie-up of the year, and the fifth in December alone.
The price of the all-cash deal, set to close by the second quarter of 2023, is yet to be disclosed.
With $375 million in assets, Land of Lincoln is one of the smallest credit unions to acquire a bank. Buying Colchester will give the 13-branch credit union one added location, plus $82 million in assets, $74 million in deposits and $27 million in loans. The deal is also meant to boost the credit union’s presence in McDonough County and improve access to its services in surrounding areas.
“The acquisition is part of Land of Lincoln’s strategic growth plan, which includes adding branches and markets to better assist our members in Illinois,” Land of Lincoln CEO Robert Ares said in a press release.
Colchester, meanwhile, will liquidate and distribute its remaining assets to its stockholders after the deal is complete.
“After carefully considering what is best for our employees, customers, shareholders and the communities we serve, we believe our decision to become a part of Land of Lincoln is the best path forward for our organization,” Colchester CEO Mark Reynolds said in the release. “We are excited to bring together two organizations focused on exceptional customer service and high value products, as well as a philosophy of strong community support.”
Colchester is the fourth Illinois bank to be bought in 2022 as part of credit union growth strategy. Credit Union 1 in June said it would acquire Gurnee, Illinois-based NorthSide Community Bank — a day after NuMark Credit Union announced its planned purchase of Earlville, Illinois-based Pioneer State Bank. And Wisconsin-based CoVantage Credit Union said in April it would buy substantially all of New Lenox, Illinois-based LincolnWay Community Bank’s assets and liabilities.
“The Midwest has been and will continue to be a very active region for these deals,” Honigman attorney Mike Bell said in an email response to Banking Dive, adding that he expects a new transaction to be announced next week involving entities in the Midwest. “Expect 2023 to be a very active year for these transactions.”
At the very least, December was an active month in the sector. Over a two-week span earlier in the month, Alabama One Credit Union said it would acquire First Bank of Wadley; Georgia-based LGE Community Credit Union announced it would buy Greater Community Bank; Michigan-based Dort Financial Credit Union said it would purchase Florida-based Flagler Bank; and Iowa-based Veridian Credit Union agreed to buy Minnesota-based American Investors Bank and Mortgage.
The uptick in activity will likely displease trade groups such as the Independent Community of Bankers of America (ICBA), which argues that since credit unions are exempt from tax, it allows them to offer higher purchase prices in proposed deals and helps them grow more freely than taxpaying banks.
2022 ended with 16 proposed bank purchases by credit unions — a total that equals the previous record seen in 2019. Credit union-bank tie-ups slowed in 2020 as the COVID-19 pandemic took hold. Thirteen such deals were proposed in 2021.