More i-banks land roles advising credit unions on bank acquisitions

Three investment banking firms recently secured their first assignments advising credit unions on whole-bank acquisitions.

Hovde Group LLC advised Veridian CU on its Dec. 6 announced deal for American Investors Bank and Mortgage, while CEO Advisory Group and Bancorp I INC., were two of the three financial advisers to Dort Financial CU on its deal for Flagler Bank. The credit union's third adviser, McQueen Financial Advisors II Inc., has been the most active adviser to credit unions acquiring banks in recent years, with 26 buyside credits on such deals since the start of 2015.

The new names landed buyside assignments as more investment banks are positioning themselves to win spots on credit union deals for banks. CEO Advisory Group President and CEO Glenn Christensen said his firm has traditionally focused on mergers between credit unions and has no intention to move into advising banks. But it has started working in recent years on transactions targeting banks, including branch and business unit deals, Christensen said.

"More and more of my clients, as they consider their growth options, are looking at certainly credit unions as one option, but increasingly banks have become something that they are considering," he said, adding that the firm has "several" more such deals in the pipeline for 2023.

CUs keep targeting banks

Banking industry groups, and bank regulators in some states, have objected to the growing trend of CU-bank deals, arguing that credit unions have an unfair advantage in pursuing acquisitions because of their nonprofit status, which makes them tax exempt. As a result, Christensen said, some bank-focused advisory firms have avoided working directly with credit unions.

"In some ways, some of the other firms haven't really wanted to touch the credit union community, which I think gives them an opportunity to work with someone like me rather than go into that field directly," he said. "For them, it's probably easier to be more collaborative with a firm like mine and not impact those relationships that they already have."

Despite the challenges, the deals keep coming to market, and 2022 has been an historic year for credit union acquisitions of banks. LGE Community CU's Dec. 16 agreement to acquire Rome, Ga.-based Greater Community Bank was the 14th credit union acquisition of a bank announced in 2022, making it the busiest year yet for such transactions, surpassing the record set in 2019, according to S&P Global Market Intelligence data, which excludes terminations.

Relationship business

Since the start of 2015, Hovde has advised 22 bank targets in credit union deals, including Flagler Bank holding company Flagler Bancshares Corp. in the Dort Financial transaction. But the i-bank landed its first sell-side role on a CU-bank deal with the Veridian assignment, which arose out of an existing relationship stemming from Hovde's past work advising bank acquisition targets in the Midwest, Kirk Hovde, Hovde Group managing principal and head of investment banking, said in an interview.

Hovde said his firm is not actively pitching representation for credit unions, and its focus in credit union M&A will remain on advising bank targets. Hovde has enough experience to handle the assignments when they come along, he said.

"Myself and one of our partners have done more individually than some other firms," Hovde said. "We don't need to hire to get the expertise, we already have it."

More opportunities could arise, as the pace of CU-bank deals is likely to continue, especially as leaders at smaller banks look for an exit, Hovde said.