$6B Michigan credit union seizes strong acquisition opportunities in Florida

A national financial industry trend launched on the west coast of Florida nearly a decade ago with the acquisition of Charlotte County-based Calusa Bank — credit unions buying banks — has mushroomed in the past five years.

At least 50 deals involving credit unions buying banks, or parts of banks, have been announced or completed since 2019. The trend slowed somewhat in 2023, with eight deals so far. That’s down from a record-setting 15 in 2022, according to data from S&P Global Market Intelligence and American Banker. 

The slowing pace has done little to dissuade at least one credit union executive, Dearborn, Michigan-based DFCU President and CEO Ryan Goldberg from the trend. DFCU, with $6.18 billion in assets through June, according to federal credit union data, has been an active acquirer of banks and bank branches in Florida, with, Goldberg projects, more to come. And while the Sunshine state is new territory for DFCU, which traces its history to 1950, as the Ford Engineering Employees Federal Credit Union, it’s familiar ground to Goldberg: He worked for Regions Bank for more than 20 years in the area, running the Southwest Florida market president 2004 to 2013. “We will keep looking for opportunities in Florida,” Goldberg says.

Those opportunities, if not coming as rapid-fire as 2022, maintain a dose of credit union versus banks controversy. 

Credit unions generally like these deals because it’s an opportunity to get into new markets with an established customer base and build economies of scale. Banks — at least the ones not being acquired — generally don’t like these deals. The biggest contention: Credit unions, as nonprofits, are exempt from federal and most state taxes. So when a credit union buys a bank, the taxes that bank pays go away. Credit unions are also exempt from the Community Reinvestment Act, written to incentivize banks to lend and help rebuild poorer neighborhoods.

Independent Community Bankers of America President and CEO Rebeca Romero Rainey addressed the issue in early September, after the trade group said five community banks announced credit union acquisitions in the same week. 

“ICBA and the nation’s community bankers urge Congress to investigate the credit union tax exemption and its harmful impact on local communities,” Romero Rainey said, in part. “The surge in credit unions leveraging their taxpayer subsidies to acquire local community banks has devastating implications for local communities that go well beyond their expansion of the federal tax exemption for more than $2 trillion in credit union assets.”

A small chunk of the credit union-bank deals nationwide — not only Calusa, which Dunedin-based Achieva Credit Union bought for $23.2 million, 1.36 times book value, in 2015 — have taken place on Florida’s Gulf Coast. 

DFCU Financial is behind two of those deals. In early January 2023 it closed on a $94 million deal to buy Tampa-based First Citrus Bank, which had $689 million in assets. That was the largest credit union acquisition of a bank in 2022, according to American Banker.

Then, in late September, DFCU said it planned to acquire Iowa City-based MidWestOne’s Southwest Florida market and its two branches in Fort Myers and Naples. DFCU said it would pay a deposit premium of 7.5%, or about $11.9 million for the portfolio — about $159 million in deposits and $162 million in loans. After closing, expected in 2024, that would give DFCU eight Florida locations. 

Addressing the credit union’s M&A strategy, Goldberg says the challenging economic climate, with high interest rates and compressing margins on banks, means “many institutions will be focusing inward” over the next year or so. That, he says, is “an opportunity for us to be looking outward. A lot of people will be looking to sell or have an exit strategy in the next year or so.”

“We see the challenges in the market,” Goldberg adds, “and we want to know how we could be entrepreneurial, how we can be opportunistic.”

Florida, like it is for many others, in and out of banking, is attractive to credit unions for one core reason: people — many with fat wallets — are moving to the Sunshine State in droves. “Michigan is a moderate growth market, but nothing like Florida,” Goldberg says. “We wanted to find opportunities to grow and serve more members.”

Not only the traditional credit union members, with car loans and low interest credit cards, says Goldberg, but commercial banking. The First Citrus acquisition especially has provided DFCU a road to commercial lending, Goldberg says, with the bank’s longtime leader, Jack Barrett, remaining with the entity. And DFCU will remain opportunistic on acquisitions. “We still have a desire to fill out on the west coast of Florida,” Goldberg says, adding the Interstate 4 corridor and Oralndo are also long-term targets. 

A Florida State graduate, Goldberg, named president and CEO of DFCU in April 2022, comes to the post, and acquisition strategy, after spending the first 25 years of his financial services career with Regions. Now entrenched on the credit union side, his view on credit unions buying banks is a bit more pragmatic than, say, ICBA or other bank lobbying groups. “The vast majority of deals are still banks buying banks,” Goldberg says. “And while bankers might push back (on credit unions buying banks) it’s a free market out there. Banks aren’t sold. They are bought.”