Thursday, August 30, 2018

Turning the Table

Over the last six years, there have been almost two dozen announced or completed deals involving credit unions acquiring banks.

It is time for banks to consider acquiring credit unions as a potential growth strategy.

The board of a credit union, as part of their fiduciary duty, must consider any merger proposal.

Members would benefit from a credit union merger into a bank. Members would receive a one-time payment for their interest in the credit union's net worth.

For example, when Nationwide Federal Credit Union merged with Nationwide Bank, the members of Nationwide FCU received almost $150 for every $1,000 in an account.

However, such a transaction is not without challenges.

A bank will need to find a credit union that would be willing to entertain a merger offer. This could take time, as key decision makers at a credit union are likely to lose roles and responsibilities after the merger.

Also, the National Credit Union Administration's regulation governing a credit union merger into a bank creates obstacles to such deals. Read 12 CFR 708a Subpart C.

To ensure that the transaction is successful, a bank and credit union should have similar cultures and the merger makes sense as a strategic fit.



4 comments:

  1. There are over 250 credit unions exceeding $1B in assets.
    The top 100 credit unions exceed $2B in assets. These credit unions are banks. Hiding behind the federal credit union charter they pay no tax. They are tax exempt. We call them pseudo-credit unions. NAVY is over $91B, State Employees is $37B, Pentagon is $23B, Boeing is $18B, Schools1st is $15B, Golden1 is $11B, 1st Technology is $11B, Allianz is $10B, Security Service is $10B and America 1st $9B. These credit unions will never sell to a bank - why would they give up their tax exempt status? The tax exempt status allows these credit unions an advantage over the tax paying banks. And the credit unions don't have to pay off their stockholders on Wall Street. The conversation at NCUA should be to move any credit union over $1B in assets to a bank charter so they can participate in paying taxes like their peer banks. Don't hold your breath. It aint gonna happen. Not anytime soon.

    ReplyDelete
  2. Start by looking at the over capitalized credit unions and make their members a cash offer equal to the amount of over capitalization plus anticipated expense savings.

    ReplyDelete
  3. Next, look at credit unions with very high ROAs. Offer their members preferred stock with a dividend rate equivalent to the difference between current ROA and the nominal ROA.

    ReplyDelete
  4. credit union members don't have the option to be acquired by a bank, not really.
    ncua made the rules too hard and costly.
    they are the same rules as trying to change charter to a bank which ncua made exceedingly more difficult and expensive than what banks have to do to change charter.
    and the rules are exceedingly more difficult than congress intended.
    congress knows about it and has done nothing about it.
    congress is more dysfunctional than ncua.
    we would have changed to a bank years ago.
    better regulator, better operating rules.

    ReplyDelete