Thursday’s announcement of the Baltimore-based $1.2 billion Municipal Employees Credit Union’s proposed acquisition of the $61 million Advance Bank in Baltimore is yet another sign that the trend of credit unions buying banks is gaining traction.
Credit union attorney Michael Bell in Royal Oak, Mich., expects this trend will continue through this year and next, opening a strong opportunity for credit unions to grow.
“This is going to keep happening and it’s going to accelerate,” Bell said this week, as more credit union executives become aware that they can purchase banks.
He said some credit union executives are unaware they can buy banks, noting that in a recent presentation he made on this topic before 200 credit union executives, he estimated half were not aware they could purchase banks.
Richard S. Garabedian, a Washington attorney who specializes in credit union charter conversions, also said in an interview with Credit Union Times last month that the trend of credit unions acquiring banks is apparently gaining steam.
As proof, he pointed to recent transactions such as the $353 GFA Federal Credit Union acquisition of the $83 million Monadnock Community Bank in Peterborough, N.H, the $1.3 billion United Federal CU in Michigan purchase of Griffiths Savings Bank in Indiana, and the proposed $2 billion Landmark CU of New Berlin, Wis., acquisition of the $290 million Hartford Savings Bank in Hartford, Wis., which secured NCUA approval in March.
In addition, the $410 million Self-Help Federal Credit Union in Durham, N.C., purchased the failed Second Federal Savings and Loan Association in Chicago in November. The bank, now named Second Federal Savings, officially became a division of Self-Help FCU on Feb. 1.
Bell believes the pace of credit unions purchasing banks will pick up because NCUA is encouraging credit unions to pursue these transactions.
“We now have a friendly regulator when it comes to this, and that is a big deal because these trends will ebb and flow,” said Bell, a former Credit Union Times Trailblazer 40 Below who is involved in the MECU transaction. He also was involved in the United FCU and the GFA FCU deals.
What’s more, large banks, including super regional banks, are not looking for acquisitions, opening opportunities for credit unions to approach small banks that are still viable but want to get out from under the burdens of regulations and compliance that are making it increasingly more difficult for small financial institutions to compete, Bell said.
Most importantly, Bell said, he believes small banks are most concerned about their legacy when looking to merge with another financial institution.
“They don’t want to be the ones that shut down branches or lay off employees,” Bell said. “The credit union model is different in that they keep the branches open, hire most if not all of the employees and become even more involved in the community.”