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Weekly Recap — CUs remain on the hunt for attractive bank acquisitions

The weekly recap featuresnews on regulatory actions, mergers and other issues facing the credit unionspace. Send tips, ideas and chatter to ken.mccarthy@spglobal.com.

News

*Acquisitive credit unions hungry for scale are increasingly consideringcommunity banks astargets, as these small lenders look to sell amid prolongedstruggles with heavy regulation, low interest rates and fierce competition fromlarger players. Credit unions are viewing banks as opportunities to bothacquire size and new business lines, as community banks, while focused onconventional lending and deposit gathering much in the way that credit unionsare, often present more diverse lines of business and therefore newopportunities for long-term revenue growth. There were six announced dealsbetween the start of 2015 and the end of August this year that involved acredit union buying a bank, according to an S&P Global Market Intelligenceanalysis.

*Former National Credit Union Administration Chairman Debbie Matz will soonjoin the board of aMidwestern bank. In an email to S&P Global Market Intelligence, Matz saidan announcement on her appointment will be forthcoming in the next day or two.She declined to specify the bank.

*U.S. credit unions continue to grab an increasing share of , but community banksstill hold the upper hand by far in terms of total loans outstanding in thatlending line. Credit unions grew member business loans by 3.47% quarter overquarter and 15.02% on a year-over-year basis, an S&P Global MarketIntelligence study found. By comparison, commercial and savings banks below $10billion in assets grew business loans by 1.06% quarter over quarter and 5.72%on a year-over-year basis.

*During the 2016 National Association of Federal Credit Unions' inWashington, D.C., 10 congressional members provided their remarks to bankershopeful for deregulation. All but one of the speakers are on the HouseFinancial Services Committee, most are Republicans, and most used their time totake aim at the Consumer Financial Protection Bureau. "I don't think theCFPB needs to go away entirely," Rep. Blaine Luetkemeyer, R-Mo., said."Although if it needs to, there's plenty of other agencies to do thejob." A few minutes later Luetkemeyer spoke with a NAFCU member on whetherthe CFPB should exist at all, referencing a lawsuit on the constitutionality ofthe agency's structure.

* Intoday's low-rate environment, financial institutions need to offset theiroperating costs. But implementing fees gets a little tricky for credit unionsthat often like to tout such charges as the difference between themselves andtheir banking counterparts. "Clearly, this is a tough line to both defineand walk, but that's why the fee structure (at credit unions) is generallylower and probably in line with cost recapture," said Vincent Hui, seniordirector for Cornerstone Advisors. In a study conducted by the Filene ResearchInstitute, many credit unions said they consider their fees to be"member-friendly" if they are less expensive than other feesavailable in the market. The survey found that the definition had less to dowith the fees themselves and more to do with the marginal savings members enjoyby using a credit union instead of a different provider.

* Inan operating environment of low interest rates and fierce competition forborrowers it is vital for credit unions to find new loans . For Berrien Springs,Mich.-based Honor CreditUnion, that meant using social media to uncover additional lendingopportunities. Honor's public relations manager, Kaylee Williams, said in aninterview that the credit union has found some success by using Chatter Yak, awebsite that says it helps financial institutions "weave social media intothe fabric of their corporate culture." Williams said Honor recentlybooked 30 auto loans worth nearly $600,000 during a four-week campaign.

*Ethicon Credit Union has changedits name to NorthMain Credit Union. The name change was made to reflect the newlocation and become more inclusive to its membership.

Regulation/legislation

*The NCUA's stabilization fund had a net position of $1 billion at the end of the secondquarter, and the regulator does not expect to charge credit unions furtherassessments.

*Beginning with the Sept. 30 reporting cycle, the NCUA will require lessinformation from credit unions about credit union service organizations ontheir call reports. Credit unions will only be required to submit aggregateCUSO loan and investment information. All other required information is nowbeing collected directly from CUSOs through the agency's CUSO registry. TheNCUA has required CUSOs to agree to provide information directly to the agencyeffective June 30, 2014, and registration for the CUSO Registry was heldbetween Feb. 1 and March 31 this year.

*Although the Federal Open Market Committee left its target federal funds rateunchanged, anincrease by the end of the year is "very likely," said Bill Hampel,chief policy officer of the Credit Union National Association. Hampel said thatincrease will likely be followed by further increases next year, although areturn to normal rates will take several years.

M&A

*The NCUA approved 20 credit unionmergers in August, according to the agency's latest Insurance Reportof Activity. The NCUA listed "expanded services" as the reason behind13 of the mergers. Three mergers were attributed to "poor financialcondition," two were attributed to "lack of growth," one wasbecause of "lack of sponsor support" and one merger was due to"inability to obtain officials."

*Members of High Plains FederalCredit Union have voted to merge their Clovis, N.M.-based institution intoAlexandria, Va.-based PentagonFederal Credit Union. The entities combine in early November,bringing to PenFed more than 6,000 new members, High Plains' entire staff and abranch footprint in New Mexico.