JACKSONVILLE, Fla.–VyStar Credit Union said it is calling off its plan to aquire Georgia-based Heritage Southeast Bancorporation. The news comes at the same time VyStar is working to return its online and mobile banking solutions to full functionality after they crashed in mid-May.
As CUToday.info reported earlier, in the first quarter of 2021 the $12.3-billion VyStar had announced plans to buy the $1.5-billion Heritage Southeast Bank (HSB), a state-chartered bank headquartered in Jonesboro, Ga., approximately 17 miles south of Atlanta.
Heritage Southeast Bancorporation is the holding company for Heritage Southeast Bank, which operates as Heritage Bank, Providence Bank and The Heritage Bank in its various markets. HSB had 22 branch locations across Southeast Georgia, through Savannah and into the Greater Atlanta Metro area at the time the planned acquisition was announced.
Since the initial report, it was reported VyStar will pay $195.7 million for the bank, according to Hovde Group, the investment bank that advised Heritage Southeast, as first reported by BankDive.com.
In the wake of its announcement it was seeking to buy the bank, banking industry trade groups and banks themselves raised objections, arguing—in a twist--the deal would “cut regulatory safeguards for low- and moderate-income consumers.”
In August 2019, VyStar finalized its purchase of Citizens State Bank in Perry, Fla.
‘Lack of Clear Path’
But in a released statement, VyStar is now saying both organizations’ boards of directors had approved the termination “after careful consideration of the proposed transaction and the lack of a clear path forward to obtaining the regulatory approvals needed for closing.”
“Following a thorough evaluation of the transaction between VyStar and HSBI, we have mutually agreed that moving forward separately is the prudent decision. VyStar will continue to expand our services in Georgia,” VyStar President/CEO Brian Wolfburg said in the statement. “We would like to extend our sincere appreciation to both the VyStar and HSBI teams that worked diligently throughout an extensive process.”
Added Leonard A. Moreland, CEO of HSBI, “After much contemplation and discussion, the board of directors of both institutions concluded the best path forward would be to discontinue the proposed transaction between our companies as all required regulatory approvals would not be obtained in a timely manner. The termination of the purchase agreement positions HSBI to benefit from an improved post-COVID 19 economic climate, stronger capital position and focus on the consistent growth and value creation we have delivered through the years. Additional strategic initiatives that have been delayed and designed to improve efficiencies can now be pursued along with strategic partnerships that will enhance shareholder value.”
Negative Reviews
After Jacksonville’s NewsJax4.com reported the cancellation of the planned acquisition, its webpagereceived more than 90 comments, nearly all of them negative.
“Stay on the story...this might be a big one...something fishy going on with VyStar ...it feels like banking online in 1998, or worse...getting help is like, possible, much like winning the lottery is ´possible’,” wrote one commenter.
$200M in Subordinated Debt
In the first quarter of this year, VyStar announced it had issued $200 million in subordinated debt, the largest such offering by a credit union to date. The offering, arranged by Olden Capital, was was sold to 41 investors including credit unions, banks, insurance companies and asset managers.
In an analysis on his blog, Chip Filson noted that without the external capital infusion, Vystar’s net worth would have been 7.9% of March 31, 2022 assets. With the debt and using a four quarter asset average as the denominator, VyStar reported a net worth ratio of 10.15%, Filson said.
Online, Mobile Banking Still Not All the Way Back
The announcement comes at the same time VyStar continues to work on a full return of its online and mobile banking solutions, which crashed in mid-May during a conversion.
In its latest email to members, VyStar announced it is “nearing the final stages of testing for re-launch of the mobile app.”
As CUToday.info reported, a month after the outage occurred a class action lawsuit against VyStar was filed alleging members had been harmed by the inability to access their funds, make transfers, and more.