Why are so many credit unions now buying banks?

Though it's a small percentage of overall community bank M&A activity, the number of credit union acquisitions of community banks is drawing scrutiny. Some say the deals are driven by expansion considerations, while others insist policy loopholes are being exploited.

The whole notion of a bank-credit union combination seems awkward, given the different ownership and governance structures. Such combinations have been very rare until fairly recently. Inter-industry combinations hit a high point in 2019, and are on track to equal 2020’s pace by the end of 2021.

It’s a trend fraught with emotion and controversy, more so on the banking side, since those are the institutions being acquired. This spate of deals has stirred up long-standing policy issues relating to taxation and field of membership.

According to a review of S&P Global data by the Independent Community Bankers of America (ICBA), there were 13 such acquisitions in 2018, 21 in 2019, 15 in 2020 and ten so far in 2021. It should be noted that other analyses of this trend turn up slightly different numbers, perhaps reflecting different definitions of what constitutes a community bank, and if only whole-bank acquisitions are counted. But either way, the trend is up.

 

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