By Steve Gelsi
The deal won approval from regulators and provided a path for other credit unions to bulk up in the face of dwindling numbers, that have fallen to about 5,000 now from 15,000 a generation ago. The U.S. is currently home to about 5,000 banks as well.
“Small [bank] institutions are squeezed by the current economic pressure, tight margins, and they often face succession plan issues, as well as the challenge of finding replacement management, growth issues, competition issues, and cost of technology issues,” Bell said. “Add all those up and it’s really hard to be a small financial institution.”
Credit unions also manage to stand apart from commercial banks as buyers because they can’t use stock or equity as currency for the deal.
“A credit union buyer is an all-cash buyer,” Bell said. “That’s also very appealing compared to bank deals, which are often partially in stock.”
Credit unions may also be more attractive acquirers than commercial bank buyers because they’re less focused on generating quarterly profits.
“On the softer issues, [credit unions] are very friendly in terms of keeping branches opening and other issues,” Bell said. “They don’t have to find cost savings and fire people like other people would have to. This is what sellers are realizing.”
Bell said he’s built up a client list of 150 of the largest credit unions as the idea of buying a bank steadily picks up steam. The regulatory review process for mergers remains complicated, but navigable, he said. It takes five to seven months to close a deal typically.
To date, there has been no transaction size in the industry larger than a bank with$1 billion-plus in assets, but Bell expects that to change as soon as 2023 if current trends continue.