Filene research finds credit unions are profiting from bank acquisitions

CEOs plan to pursue new bank deals over the next 18 months.

A new research report by Filene released Wednesday determined the 14 credit unions that acquired 16 banks since 2012 had somewhat stronger financial metrics with higher capital ratios, greater returns on both assets and equity and lower loan net charge-off ratios than comparable-sized credit unions by the end of 2017.

What’s more, the report said credit union executives plan to pursue new bank acquisition deals over the next 18 months.

David A. Walker, a business professor at Georgetown University who authored the report “Credit Unions’ Acquisitions of Banks and Thrifts,” came to these conclusions after interviewing credit union CEOs and conducting financial analyses of the acquiring credit unions and acquired banks — before and after the acquisitions were made — based on variables and ratios that simulate the CAMEL (capital adequacy, asset quality, management, earnings and liquidity) regulatory system.

This system is a major tool the NCUA, the three federal bank regulators and the Farm Credit Administration have used to evaluate the financial performance of retail financial institutions since 1979, Walker noted.


continue reading »