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More credit unions expected to acquire chartered banks amid consolidation pressure, M&A lawyer says

By Steve Gelsi

Michael Bell of Honigman specializes in credit-union acquisitions of banks as a business that looks robust in 2024

A deal lawyer who specializes in credit union acquisitions of small, chartered banks said he sees activity picking up again after a pause during the regional-bank crisis earlier this year.

Michael M. Bell, chair of the financial-institutions practice group at Detroit-based law firm Honigman LLP, said the sector has seen five credit union purchases for banks with assets of $150 million to $300 million announced in the past week, with his firm handling three of them.

"We just had a sensational week and it shows the increased pace of deals through 2023 and then gasoline gets thrown on the fire in 2024 -- it could be more intense," Bell told MarketWatch.

Bell and his team at Honigman have been closing more than 10 but less than 20 deals in recent years. But Bell said he sees more than 20 in the pipeline for 2024 if the economy takes a soft landing, as many predict. The firm typically works on more than 100 prospective deals per year but only about a fifth of them come to final fruition.

Deal-making has picked up steam over the summer after a pause starting in late March due to uncertainty in the marketplace on the heels of the collapse of Silicon Valley Bank, Signature Bank and First Republic banks, he said.

One of the largest mergers in the space was Summit Credit Union's late 2022 acquisition of Commerce State Bank of Indiana which had just under $1 billion in assets. With the addition of Commerce State Bank, Wisconsin-based Summit Credit Union has more than $6 billion of assets and 54 offices.

Bell said he expects deals to get larger in the sub-sector of the financial-services market of credit unions buying banks. He said he's currently working on multiple potential deals for banks with $1 billion to $2 billion in assets.

Bell was a pioneer in the deal type with his role advising a Credit Union to buy a bank in 2017. Prior to that, credit unions would only grow by adding more depositors who also jointly own the credit union.

Also read:Credit Unions buying banks? Yes indeed, says this deal lawyer

But motivated by the opportunity for geographic expansion, widening their service offerings and adding fresh talent.

While credit unions and tiny chartered banks are not usually listed on the Nasdaq or NYSE, some medium-sized regional banks provide M&A advising and capital-raising lending services to smaller banks looking to sell their business. Some of those include Stifel Financial (SF), Raymond James Financial (RJF), Hovde Financial and Janney Montgomery Scott.

Also read: Smaller banks will be under pressure to merge as competition for deposits heats up: S&P

-Steve Gelsi

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.


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09-07-23 1509ET

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