Editor’s Note: This article accompanied our longer feature on credit union-bank acquisitions in February’s BankBeat magazine.
Experts say owners considering selling their banks should think about the ability and desire of the prospective credit union acquirer to serve its current base of customers while keeping employees.
Although community banks and credit unions are generally community-focused, they are less likely to have similar business models and operating strategies, wrote Tony Moch, an attorney with Winthrop & Weinstine, and Paul Sirek, an accountant with Eide Bailly, in a 2020 white paper on the subject. Credit unions often focus on commercial and residential real estate lending, while community banks’ work generally focuses on commercial real estate loans and other business lending.
Banks should consider the potential income tax consequences along with legal and regulatory expenses to determine how much they will receive on a net basis from such a deal before proceeding, wrote Moch and Sirek. Sellers should also consider the net proceeds it would receive for assets the credit union was unwilling — or unable — to acquire.
Credit unions sometimes want to acquire banks to onboard commercial lending expertise, said Moch and Sirek. Credit union buyers could then face challenges keeping commercial customers if they can’t retain loan officers. Because CRE loans, along with acquisition, development and construction loans, frequently make up a substantial part of bank balance sheets, they can be difficult to examine. Credit unions are also limited on the amount of commercial loans they can hold on their balance sheets.
Cornerstone Advisors Managing Director Ryan Brogan said CU-bank deals are more straightforward and price-centric for the seller, whereas the acquiring credit union faces “a little more of a mixed bag.” Acquiring CUs must understand that banks are much more commercially-focused and that such deals require investments in infrastructure, digital transformation and relationship management. While such deals can benefit credit unions, Brogan said CUs sometimes could grow organically for the same cost of integrating a bank.