Monday, May 6, 2019

St. Louis Fed Examines the Topic of CUs Acquiring Banks

An article in the Federal Reserve Bank of St. Louis Regional Economist examines the topic of credit unions acquiring banks.

The article notes that the acquisition of another financial institution by a credit union is a faster way to grow compared to organic growth.

One possible reason for a credit union acquiring bank is an expansion of its business loan portfolio.

"The average ratio of business loans to total loans for the acquiring credit unions in the quarter before the transaction was 8.6 percent, whereas the average for the acquired banks was 33.8 percent. The acquisitions of the commercial banks raised the business-loans-to-total-loans ratio in the credit unions to 10.9 percent."

In addition, smaller community banks are an attractive acquisition target, because they have a strong relationship their communities.

However, the article points out that field of membership issues can act as an obstacle to these mergers.

Read the article.
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