trending Market Intelligence /marketintelligence/en/news-insights/trending/vyvEVXlLWfQEB7F5te-wDw2 content esgSubNav
In This List

More community bank sellers turning to credit unions for all-cash M&A

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


More community bank sellers turning to credit unions for all-cash M&A

Credit unions have long been a major source of competition for local banks, but more small depositories are seeking them out as merger partners.

At the Janney Community Bank CEO Forum in Atlanta on Sept. 19, deal advisers said they expect the trend of credit unions buying banks to continue, including instances where selling banks contact credit unions directly.

"I've got more and more selling banks that have reached out to credit unions," said Jennifer McCain, co-chair of the banking practice at the law firm Maynard Cooper & Gale. Similarly, credit unions are increasingly appearing during the bidding process for banks, said Mark Kanaly, corporate and finance lawyer at Alston & Bird.

There have been 14 deals announced so far in 2019 in which credit unions agreed to buy banks, compared to only nine in the entirety of 2018. Experts said the rise of credit unions buying banks all comes down to price.

Banks interested in all-cash deals are turning to credit unions, McCain said. Since credit unions do not have stock, they can only offer cash bids.

"For the $100 million bank that doesn't have an alternative and there isn't a bank buyer there, and they can get cash, you can understand that. [Credit unions] are here to stay" as buyers, said Matt Veneri, managing director and co-head of investment banking at Janney Montgomery Scott.

However, credit unions are not as sophisticated when it comes to doing deals, said Kanaly. "[Banks] are going to have to take more of a lead on getting the deal done because it's just not in [credit unions'] wheelhouse of competencies," he said.

While more banks are eyeing credit unions as potential merger partners, they are largely keeping their interest quiet.

"They approach the credit union and say, 'We are interested, but don't tell anyone else in the banking community,'" said McCain.

A major reason for keeping the dealings secret could be the tension between banks and credit unions competing for consumers. At the conference, United Bancorp. of Alabama Inc. President and CEO Bob Jones called credit unions a direct threat and pointed to credit unions' ability to build relationships as the main driver for that competition.

"Credit unions are very efficient at taking a car loan and turning it into a relationship. That is what they have built their model around," he said.

Many community banks felt the same way about their local credit unions. "You shouldn't underestimate the competitive disadvantage we are at," said Jim House, president and CEO of First US Bancshares Inc.