Here are reasons the time might be right for your CU.

by. Mike Bell

Credit Union Management magazine’s Web-only “CFO Focus” column runs the second Thursday of the month.

A lot has happened since January 2013. In January 2013 I wrote a “CFO Focus” column titled “Buying a Bank,” which included a litmus test for whether a credit union would want to buy a bank. Just over a year has passed and we have reached a point that has changed the question from “Should you buy a bank?” to “Why aren’t you buying a bank?”

What has happened outside our industry to make it a good time for a CU to buy a bank?

The short and vital answer: Both nothing and a whole lot.

First the nothing. The merger and acquisition market outside our industry has been and remains stagnant. Bank-to-bank M&A activity in general has been in a “flatline” situation since 2009 with virtually no activity nationally among smaller banks of less than $500 million in assets. Small banks are not merging with each other for a series of reasons, including punishing regulations and high deal costs. Large and regional banks are not acquiring smaller banks at the moment, either. Small banks have effectively been forced to eliminate M&A from their strategic plans.

Now the whole lot. The regulatory environment could not be more challenging for smaller banks. I fully understand that we, too, in the CU world are feeling the regulatory burden; but, those on the bank side are feeling it more. The Office of the Comptroller of Currency and the Federal Deposit Insurance Corp. are required by law to regulate the biggest banks and the smallest banks equally. As a result, a small bank today is facing sharply increased regulations, slim margins and no options for M&A deals or combinations. They are essentially stuck in this very difficult existence. Finally, due to the difficult environment and the lack of an M&A marketplace for quite some time, boards and senior management of banks are growing tired. Strategic planning indicates something needs to be done, but what can realistically be done? This question can sometimes be answered by the still unknown transaction (despite considerable coverage in the press in both industries): CUs buying banks.

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