Consolidation in the financial services has enveloped credit unions as these non-profit institutions bulk up by buying small commercial banks, lawyer says.
When deal lawyer Michael M. Bell worked on the purchase of Griffith Savings Bank by United Federal Credit Union in 2012, the transaction marked the first time a federally chartered credit union acquired the assets of a state-chartered, FDIC-insured mutual savings bank.
“You have to scale,” Bell told MarketWatch. “It’s a fact of our economy [and] that’s happening in this industry. The small are disappearing and the big are getting bigger.” Before Bell came along, Credit Unions had rarely if ever turned to bank acquisitions for growth, and instead would expand by adding more depositors.
Another reason that credit unions didn’t buy banks is because they’re typically smaller than commercial banks. Bell said his idea of a credit union buying a bank came out of conversations with a credit union about the challenge of non-organic growth in the business. “Small [bank] institutions are squeezed by the current economic pressure, tight margins, and they often face succession plan issues, as well as the challenge of finding replacement management, growth issues, competition issues, and cost of technology issues,” Bell said. “Add all those up and it’s really hard to be a small financial institution.”
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