Veridian Credit Union in Waterloo, Iowa, has agreed to buy American Investors Bank and Mortgage in Eden Prairie, Minnesota.
The $6.7 billion-asset Veridian did not disclose the price it would pay for the $113 million-asset bank. The transaction is expected to close in July 2023, the companies said Tuesday.
Founded in 1934, Veridian Credit Union has 985 employees, 311,000 members and operates 30 branches across Iowa and eastern Nebraska. The American Investors Bank and Mortgage acquisition will mark Veridian's entry into the state of Minnesota.
"We're excited to welcome the employees and clients of AIBM to Veridian and eager to become a part of the Eden Prairie community,"
AIBM Chief Executive David Coauette is planning to retire at the transaction's completion after 21 years with the bank. Veridian will retain all 14 remaining AIBM employees and its sole branch.
"American Investors Bank and Mortgage clients will continue to experience the personalized service they are accustomed to and will benefit from additional services offered by Veridian, along with the ability to meet the needs of an expanded base of clients," Coauette said in the press release.
There have now been 12 announcements this year of a credit union buying a bank.
Most recently, Wings Financial Credit Union in Apple Valley, Minnesota,
Last year, 13 banks agreed to be
Attorney Michael Bell of the law firm Honigman in Detroit advised Veridian on the deal. He said the Midwest will likely remain an attractive area for credit union-bank deals into 2023.
"There are so many smaller banks in Wisconsin, Minnesota, Illinois, etc., that more of these will happen in these states versus states with fewer small banks," Bell said.
Kirk Hovde, head of investment banking for Hovde Group, which advised Veridian on the deal, said the firm is working on a few credit union deals for banks that it expects will be announced before the new year.
Hovde said the Midwest is typically a more active M&A market than other regions because there are more banks and credit unions there in any other part in the country.
Also, the average size of banks in the Midwest is smaller than the average in other regions, and credit unions have typically acquired the smaller banks, with a few exceptions.
But Hovde said 2023 will be a wild card for credit union-bank deals.
"There are a lot of conversations going on, and credit unions are able to get more comfortable with" the issue of accumulated other comprehensive income, one "that is
Hovde said most banks are sitting with unrealized losses in their securities portfolio, which flows through the balance sheet in AOCI, resulting in a hit to tangible common equity. Even though that loss hasn't been realized, there's an impact on what buyers are willing to pay because of purchase accounting that has to be done at closing of a deal.
"Credit unions have appeared to be more willing to take the upfront mark related to AOCI because they will recoup that loss if they hold the portfolio to maturity," Hovde said.
Minnesota Bankers Association President and CEO Joe Witt said the credit union tax exemption gives those institutions a day-to-day competitive advantage, but their biggest benefit is that they can retain capital for future growth much faster than tax-paying banks can.
"Credit unions buying community banks is the logical, predictable outcome of the credit union industry's 100% income tax exemption," Witt said.
American Investors Bank and Mortgage was chartered in 2004. It serves the city of Eden Prairie and surrounding Twin Cities metro communities.
Veridian was advised in the transaction by Honigman as legal counsel and Hovde Group as financial advisor. AIBM was advised by Winthrop & Weinstine PA as legal counsel and Oak Ridge Financial as financial advisor.
Veridian earned $53.6 million in the first nine months of 2022, a 41% decrease compared with a year earlier, according to call report data from the National Credit Union Administration.
