Arizona credit union-bank deal pushes 2024 to new record

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Dive Brief:

Phoenix, Arizona-based OneAZ Credit Union has agreed to acquire 1st Bank Yuma in an all-cash transaction, the companies announced Thursday. That makes a record 17 announced instances this year of credit unions buying whole banks – with nearly three months to go in 2024. Sixteen such announcements came in 2022. The deal will boost OneAZ’s assets past $4 billion, while adding five branches in Yuma, San Luis and Nogales to the credit union’s 20-location footprint. The institutions expect the transaction to close by mid-2025.

Dive Insight: “By acquiring 1st Bank Yuma, we’re expanding our ability to offer member-focused services while upholding our core values of community support, financial inclusion, and responsible lending,” Brandon Michaels, OneAZ CEO, told Banking Dive in an email.

1st Bank Yuma, a subsidiary of Western Arizona Bancorp, has carved itself a name in business banking in southern Arizona with its robust commercial and agricultural deposits and lending portfolio, Michaels said. The acquisition aims to combine the bank’s portfolio with OneAZ’s consumer deposits and lending operations to transform OneAZ into the largest commercial lender in Arizona, he added.

“It’s a game changer for us and will allow us to drive prosperity for more Arizonans,” Michaels said.

Financial terms of the deal were not disclosed, but the two organizations are expected to be fully integrated in 2026.

Following the transaction, 1st Bank Yuma CEO Wayne Gale will serve as an executive consultant since his “wisdom about these new markets for OneAZ will be invaluable as we strategically grow to serve more Arizonans,” Michaels said.

“We believe that this partnership is a good fit not only for our customers but also for our dedicated employees and the communities we proudly serve,” Gale said in a statement.

OneAZ doesn’t plan to close any branches because of the acquisition, Michaels said, adding that employees at both the bank and credit union can expect future growth opportunities.

Michaels stressed the importance of digital capabilities and fintech integration, driving banks and credit unions to seek mergers and acquisitions to stay competitive.

“Rising costs related to compliance, cybersecurity and operations have pushed many financial institutions to want to consolidate as a way to achieve economies of scale,” Michaels said. “By merging or through acquisition, banks and credit unions can … streamline operations and boost profitability in a challenging market, which provides additional resources for more innovative technology as well as community involvement.”

However, higher interest rates, regulatory scrutiny, changing consumer expectations, recession concerns, inflation and global instability have affected M&A activity, leading to a more selective and strategic focus on long-term alignment and stability, Michaels said.

“Regulators are focusing more on risk management governance, leading to heightened scrutiny of any potential deals,” Michaels said. “This has slowed the pace of M&A deals, especially for smaller institutions.”

If M&A has slowed, observers – at least at the intersection of credit unions and banks – might not be able to tell.

The 17 announced whole-bank purchases by credit unions this year come in addition to three partial-bank deals. The transactions, though, irk trade groups like the Independent Community Bankers of America, which argues that credit unions’ tax-exempt status allows them to offer higher purchase prices than banks.

The board of directors of OneAZ and 1st Bank Yuma approved the transaction Tuesday after extensive due diligence and collaboration with both teams to ensure the partnership would benefit both, Michaels said.

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