For credit unions looking to invest their strong capital position, buying a bank may be a viable option as it can generate an ROI within one to three years, according to industry professionals.
Though the number of credit union bank acquisitions is small compared to the approximately 200 credit union to credit union mergers every year, there appears to be slow burning interest in bank purchases.
Since 2012, 10 credit unions have purchased 11 banks. And in 2016, two new deals were announced and one acquisition was completed.
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What's more, three additional deals are in the making and could be announced in the near future, according to Michael M. Bell, a Royal Oak, Mich.-based attorney, who has been involved in 10 of the credit union bank acquisition deals.
Over the last five years, only one credit union bank acquisition fell through.
In December 2014, the $496 First Commerce Credit Union in Tallahassee, Fla., withdrew its application to purchase the $89 million First National Bank of Crestview in Crestview, Fla. The credit union and the bank did not comment publicly about why the deal fell through, but FDIC data showed the bank had substantial financial problems, including a capitalization level of only 2.91%.
While it's difficult to project whether credit union bank acquisitions will become a trend with traction in the years to come, industry professionals said buying a bank can be a growth option for some credit unions.
Credit union executives who have completed recent bank purchases and other industry professionals who work with credit unions and banks to facilitate these acquisitions offered their best practices that have enabled them to seal the deal.
These executives will share their insights on how to buy a bank in the June 15, 2016 print issue of Credit Union Times.
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Peter Strozniak
Credit Union Times reporter covering credit union operations, fraud, M&As, leagues, business continuity, and breaking news.
