Michigan’s ELGA Credit Union Plans to Buy Florida’s Marine Bank

The $1.5 billion ELGA Credit Union in Grand Blanc., Mich., said Tuesday it plans to acquire the $666 million Marine Bank in Vero Beach, Fla., for $79.5 million in cash.

The credit union and Marine Bancorp of Florida, Inc. (OTCMKTS: MBOF), the holding company for Marine Bank & Trust Company, said the financial institutions have signed a definitive agreement.

Subject to the terms of the agreement, shareholders of Marine Bank will receive $43.75 in cash for each share owned. The bank’s current shares outstanding total 1,818,095, according to OTC Markets Group.

The transaction, which is expected to close in early 2025 pending shareholder and regulatory approvals, combines ELGA CU’s consumer and low-income lending expertise with Marine Bank’s commercial and treasury management offerings, the financial institutions said in a prepared statement.

If ELGA CU’s first bank acquisition is completed, it will manage assets of approximately $2.2 billion, serve more than 105,000 members and expand the communities it serves to 18 branches throughout the two states. Currently, the credit union operates 12 locations in Michigan and serves more than 96,000 members, according to the NCUA.

Marine Bank was chartered in 1997 and serves the central east coast of Florida with five full-service banking centers and two loan production offices in Vero Beach, Sebastian, Fort Pierce and Melbourne.

The bank’s net income for the first quarter of 2024 amounted to $876,000, down from $1.462 million for the quarter ending March 31, 2023, a 40% year-over-year decrease, according to Marine Bank first quarter financial results. The bank blamed the earnings decline on the high interest rate environment and increased deposit competition, which is driving up the cost of funds. In addition, the current economic environment has caused a slowdown in loan growth and a reduction in mortgage origination income.

Nevertheless, the bank’s total assets grew $13 million, or 2%, from March 2023 to March 2024. During the same period, total loans grew $7 million or 2%. This growth rate slowed in the first quarter of 2024 over the fourth quarter of 2023 as total assets increased $12 million and total loans decreased $10 million quarter over quarter, Marine Bank reported in its first quarter financial results.

The bank’s total deposits at the end of the first quarter were $594 million compared to $598 million the same time last year, a decrease of $4 million or 1%. In addition, the bank’s non-interest and interest-bearing checking accounts, which it called the key to customer relationships, declined to $259 million as of March 31, 2024, compared to $299 million on March 31, 2023, a decrease of $40 million or 13%.

“We continue to attract new clients to our popular business and personal checking accounts due to our outstanding personal service and technological conveniences,” Marine Bank said. “While we actually have more checking accounts now, the average balances have declined as depositors seek other higher rate alternatives. Continued core deposit growth and controlling our cost of funds remains our primary challenge in 2024. This is where our deposit base of 40%+ in checking accounts benefits the shareholders.”

Marine Bank President/CEO Bill Penney will remain as the Florida Market President and retain local decision-making authority over banking centers in the communities the bank serves, if the proposed deal is approved.

“Like us, ELGA CU brings a personalized experience to all of its members. With its wealth of knowledge serving communities and individuals that don’t typically have access to banking services, we will be able to expand our base of customers in east central Florida,” Penney said. “Importantly, ELGA CU has committed to maintaining all Marine Bank jobs and banking centers, as well as expanding our philanthropic efforts throughout Vero Beach and Marine Bank’s other communities.”

ELGA CU President/CEO Terry Katzur said with the combined resources and capital of the bank and credit union, “We will be poised to better serve members and businesses in Michigan and Florida for years to come.”

This is the 12th credit union bank buy deal that has been announced so far this year. In 2023, there were 11 credit union bank acquisition agreements.

In a prepared statement, Independent Community Bankers of America President/CEO Rebeca Romero Rainey said the trade group, which represents the nation’s community banks, has repeatedly warned about what she described as the “dangers of tax-exempt credit unions acquiring tax-paying community banks,” noting this trend is only accelerating — accounting for roughly a quarter of this year’s banking industry acquisitions.

“Each acquisition expands the federal tax exemption for more than $2 trillion in credit union assets and displaces trusted providers of credit in local communities — while demonstrating the urgency of addressing the burdensome regulatory environment,” she said. “And while the sluggish merger approval processes of federal banking regulators constrain bank-to-bank deals, the National Credit Union Administration’s bureaucratic obstacles and roadblocks to credit union conversions and mergers make it more difficult for a bank to acquire a credit union than vice versa — further driving the replacement of tax-paying community banks with out-of-state, tax-exempt institutions in all-cash deals.”

The ICBA continues calling on Congress to hold hearings on this issue and to request a Government Accountability Office study on the credit union industry. The trade group is also asking Congress to consider an “exit fee” on these acquisitions to capture the value of the tax revenue lost once the acquired bank’s business activity becomes tax-exempt.