The year's first credit union purchase of a bank is a big one

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Hudson Valley Credit Union is starting the new year in a big way.

The $6.9 billion-asset credit union has agreed to acquire Catskill Hudson Bank and its parent company Catskill Hudson Bancorp, the companies said in a press release Wednesday. At $593 million of assets, Catskill Hudson Bank is much bigger than any bank acquired by a  credit union last year.

Stockholders of the Monticello, New York-based Catskill Hudson will receive $40.50 in cash for each share of the bank held, which equates to a deal value of approximately $28.6 million.

The merger is expected to be completed during the second half of 2024. It is the first bank acquisition ever announced by Poughkeepsie-based Hudson Valley Credit Union. 

The merger accelerates HVCU's growth in the state's Capital Region and Sullivan County, and expands its business-banking offering by adding a commercial book of business, the credit union said in the release. Upon deal completion, HVCU will have 32 full-service branches throughout the Hudson Valley and Capital Region.

"This is an important moment in our growth story," Hudson Valley's President and CEO Jonathan Roberts said in the release. "Together, we will advance our mission by serving members in the northern counties of our current field of membership and expand our service to include Sullivan County to the west."

Under the merger agreement, Catskill Hudson Bank's Chairman and CEO Mario Martinez will become a senior market president for the credit union. 

"I am confident that HVCU will bring many benefits to our employees and customers for years to come," Martinez said in the press release. "With Hudson Valley Credit Union's deep breadth of financial products and services, our customers will have even more opportunities to thrive with a financial partner that puts their well-being at the forefront — just as we have done for the past 30 years."

The largest credit union deal for a bank announced in 2023 involved the $388 million-asset Western Heritage Bank in Las Cruces, New Mexico. The $4.1 billion-asset Nusenda Credit Union in Albuquerque announced the deal in June.

The Hudson Valley deal is also the first whole-bank acquisition announced by a credit union in 2024, although All In Credit Union in Daleville, Alabama, last week said it has agreed to acquire five branches from Louisville, Alabama-based 22nd State Bank. 

Brad Bolton, former chairman of the Independent Community Bankers of America and president and CEO of Community Spirit Bank in Red Bay, Alabama, said credit unions should not be able to use their tax subsidies to purchase tax-paying banks.

"But these acquisitions have been surging, with the past five years seeing approximately a 400% increase," he said in an email. "These taxpayer-subsidized acquisitions not only diminish tax revenues, they also consolidate banking services and grow the publicly subsidized sector of the financial services industry."

There were 11 credit union deals for whole banks last year, down from the 16 announced in 2022 but still up from the tepid pace of dealmaking from five years ago.

"It's long past time for lawmakers to hold hearings to investigate the credit union tax exemption and its impact on acquisitions of taxpaying community banks," Bolton said. 

This is the first credit union purchase of a bank to ever take place within the state of New York, according to attorney Mike Bell of Honigman. Bell, who served as legal advisor to Hudson Valley, said he expects to see more such milestones in other states this year. 

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"Transactions of this nature are not common by any means but they are win-wins for the buyer and seller," Bell said in an interview. "I believe you will continue to see more of these going forward." 

Luse Gorman, PC served as legal advisor to Catskill Hudson Bank.

Hudson Valley Credit Union earned $15 million in the first three quarters of 2023, a 72% decrease compared with a year earlier, according to call report data from the National Credit Union Administration.

Net income for Catskill Hudson Bank was $1.2 million through the first three quarters of 2023 compared to $2.1 million the year before, according to S&P Global Market Intelligence data.