Acquisition of Commercial Banks by Credit Unions

So far this year, ten transactions have been announced where a credit union is buying the assets of a commercial bank. According to S&P Global Market Intelligence, this pace of cross-industry acquisition activity has already surpassed that of last year. Nine such transactions were announced in 2018. A number of strategic reasons underly this trend, including:

  • The credit union acquires new core members and attains greater operating scale. This is critical for competing effectively in consumer financial services;
  • Acquiring a bank helps the credit union to diversify its loan portfolio away from indirect automobile lending and also bolsters the products and services that the credit union can offer to business members;
  • The acquisition provides entry into an attractive geographic market. This provides new locations for the credit union to deliver products and services; and
  • Often, smaller banks have a limited number of suitors due to their lack of size. Credit unions are often willing to pay higher price compared to bank acquirers. Also, the social issues are typically not as complicated to solve in an acquisition of a bank compared to a merger with another credit union.

We expect that these business dynamics factors will continue to entice credit unions to acquire banks.

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