The increasing number of banks selling to a credit union has been a hot topic at investor conferences, within the trade press, amongst clients, at trade associations events, and in conversations with investment bankers. To that end, I’ll be on the main stage at BankDirector’s 2020 Acquire or Be Acquired Conference discussing the new players in the bank M&A game.
And the numbers would appear to support that conversation…
But we also shouldn’t lose sight of the fact that credit union transactions remain a very, very small part of the overall merger and acquisition activity.
There’s a lot to be said about the role of credit unions as potential buyers of many community banks, both from the perspective of the industry as a whole, and from the perspective of individual banks (and their shareholders). However, the vast majority of deals are still not going to involve a credit union.
While credit union accounting, capital treatment, and lack of shareholders may allow credit unions to offer higher cash offers, the limited underlying data available doesn’t support the notion that bank’s can’t compete. In the four credit union transactions to date in 2019 that have publicly provided pricing, the acquisition price was 1.40 times tangible book value. In the 20 non-credit union, all-cash, transactions to date in 2019 that have publicly provided pricing, the acquisition price was 1.52 times tangible book value.