Credit unions are buying banks at a breakneck pace: Here’s how the deals work

Many experts predict the continued decline of smaller community financial institutions. The resulting consolidation has spawned an unexpected twist: A record number of banks being acquired by credit unions, with the trend showing no signs of slowing. Beyond the policy issues is the question: Do these deals make sense?

With each year, the number of small community banks dwindles as institutions are absorbed by larger institutions or merge amongst themselves to gain scale.

Credit unions, many of which are under $100 million in assets, are following the same trajectory, with more than 900 mergers from 2016 to 2020, according to the National Credit Union Administration (NCUA). But in one surprising spin on the theme, 13 banks were acquired by credit unions in 2021, according to S&P Global. And the trend, if anything looks to heat up further. Michael Bell, Co-Chair of the Financial Institutions Practice Group at Detroit-based law firm Honigman, expects some 25 or more of these deals to be announced in 2022.

“My prediction is based on the work and deal flow I am seeing. I spend most — if not all — of my time working on these deals, and I have never seen so much activity,” Bell told American Banker.

S&P Global spoke with two deal advisers that work on credit union-bank acquisitions. Both firms said they too “anticipate around 20 such announcements in 2022.”

 

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