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Credit Unions Buying Banks: An Overview

Michael Bell

Michael Bell HeadshotLeader in the M&A arena for credit unions

Should your credit union purchase a bank? It may be a way to expand into new business lines like commercial lending. Many small banks have strong community ties and know their members better than the larger chains. These strong relationships can be advantageous to the acquiring credit union. How can navigating cultures, managing regulations, retaining employees and members make this a viable option for growth?

Listen to Mike Bell talk about why CUs buying banks is such a hot issue.

Interview transcript available below. Don't see the play button? Download the audio file.

More about Michael Bell

Bell concentrates his practice at Howard & Howard in the areas of mergers and acquisitions, strategic planning, class action defense strategies, business law, and real estate. He represents financial institutions throughout the United States and has completed over 35 M&A transactions in the past five years. In 2011, he pioneered a new option for credit unions to achieve rapid growth with the first purchase of a bank by a credit union. In this space, he has completed all but four credit union purchases of banks and has become the nationwide leader and go-to legal adviser.

  • Anthony Demangone: This is Anthony from NAFCU and today I have the official guru on this topic. I’m talking with Mike Bell, a partner from Howard & Howard, and he’s going to talk to us about this trend of credit unions buying banks. In fact, Mike is the attorney who led the very first bank purchase. I can’t imagine a better person for this. Why is this topic and issue suddenly gaining such national attention within our industry?

    Mike Bell: This has really been building over the last ten years for sure: ’17, ’18, ’19 it has just continued to ramp up and I’m telling you, it’s going strong into ’20. There are a lot of reasons and one of the key reasons is pricing. We’re in a moment. We’ve been in a moment; we’re still in that moment where the pricing is good enough for a small bank seller while at the same time being good enough for a credit union or an all-cash buyer. So, when you have both parties at a moment when things aren’t too expensive or too cheap, you’re going to get deals done.

    And let me just tell you: I’m sitting at my desk, I’m looking at my list. Randomly, and this isn’t always the case, the next two deals that should sign up that should be announced in the next 30 to 50 days are both federal credit unions by chance. It’s two different federal credit union buyers somewhere in the country. I can’t say more, but very relevant today.

    AD: Interesting. Because it’s been a lot of state chartered credit unions before. If I’m not mistaken, Mike, you’re going to have a CEO with you for this presentation who you worked with on a specific transaction. Is that correct?

    MB: Yeah, that’s right. Ron, the CEO of Arizona Federal Credit Union. At the end of 2019, we closed on their acquisition of Pinnacle Bank and I felt Ron and his team were best in class after the process and I asked him if he’d share his story and their experience, which we’re going to do in the presentation. I’m excited about that.

    AD: Give me a story or a statistic that you think might dispel a myth or might be surprising to the credit union audience.

    MB: Absolutely. And look, I’m not going to toot my own horn, but I think I’ve been through 95% of them. I just want to put that out there.

    AD: Toot away!

    MB: One thing that always comes to my mind that we knew about but I didn’t have the data to support, but we now have the data is that there is absolutely no run-off. You know, when we do this deal, we are achieving practically 100% conversion from customer to member. And then, Anthony, strap that with the fact that shortly after closing, we now have the data that shows that we have almost immediate wallet-share or per-household product gain. I don’t know what people call it necessarily, but you know what I’m saying. I think people have an inkling that, “alright we’re going to lose customers, we have to model that in,” and client after client has said, “nope, nope, we didn’t lose anybody. Oh, we gained product!” A couple different groups put together a bit of a study and looked at this and, boy, it bears out factually. There’s no run-off and there’s gain. It’s a very powerful numerical story to tell.

    AD: They’ll have to tune in for more in San Antonio. Ten more seconds about why you’re fired up about this topic and what will await attendees at this conference.

    MB: This issue – a CU buying a bank – is a NOW issue because the time is right, both regulatorily, pricing-wise, you name it. It will always be relevant. But if you have missed this the last few years, you’re okay. You can still jump on the bandwagon and get involved in a very, very good atmosphere for buyers.

    AD: Mike, I appreciate your time. I appreciate getting to know you through the years. Thanks for helping us out with this conference. I think Ron is going to be wonderful. Again everybody, it’s going to be at NAFCU’s Strategic Growth conference, March 2-4th in beautiful San Antonio, Texas.