By Ray Birch
DETROIT—It took some naivete, youthful optimism and a willingness to try something new to get credit union purchases of banks underway almost 15 years ago, said Michael Bell.
The pioneer of CU purchases of banks spoke with CUToday.info on the day the agreement with OneAZ Credit Union and 1st Bank Yuma was announced. That buy marked the 17th of the year, topping 2022’s record by one. Bell, a partner and chair of the Financial Institutions Practice Group at Honigman, LLP, looked back on how the agreements have evolved and what has been learned since it all started in 2011, when Michigan's United FCU pioneered such purchases by acquiring $81-million Griffith Savings Bank in Indiana.
Acknowledging the record, Bell noted some people count bank buys differently, including or excluding branch buys.
“But this appears to be the record,” Bell told CUToday.info. “This has been a big year. It's interesting because it means something on both sides of the transaction—meaning we can't forget these transactions are 100% voluntary. For them to come together, you have to have a willing buyer and a willing seller. I know that sounds elementary, but it's actually significant because it shows this is important to community bank sellers and it's important to credit union buyers. This is not a one-sided issue, or a one-sided transaction.”
What will 2025 bring and could a new record be set?
Next Year Another Record?
“It’s hard to say,” said Bell, who has been part of more than 60 whole-bank agreements, plus additional bank branch purchases. “But with the trajectory we're on, I think it's safe to say next year will be another big year. I expect 2025 to be just as active.”
Bell said it’s interesting to look back on how these agreements have evolved.
“Looking back is not something I normally do,” Bell said. “However, I remember when we were just starting these and I saw a lot of merit in them—a win for the seller and the buyer. I said to myself, these deals are a good story, maybe we’ll see more of them.”
Bell acknowledged that after the first buy was closed, between United and Griffiths, he was not certain there would be more. Certainly, he had no idea one year they would reach 17 by the third quarter, and on pace to top 20 for the year.
Michael Bell
Reflecting on his years of working on credit union purchases of banks, Bell said they were not easy to pull off in the early days. But as more of the agreements have been struck, and both banks and credit union regulators have become accustomed to them, the process has been somewhat streamlined.
“These deals weren't easy to do in the beginning because they were new,” he said. “I'm not going to say they're easy to do now, you have to really know what you're doing when it comes to the regulators. I think that applies to the industry. No one should be surprised that in a highly regulated industry, no matter what you're doing, you have to appease, manage and just deal with the regulators. This requires a full-on regulatory review from just about everybody on earth, and so you better know what you're doing.
“At the heart of the matter I would say very little has changed,” continued Bell. “These are what they are. But when it comes to the details, I just think we've gotten better at addressing them. I think the transactions are more efficient. I think the operational matters have been proven out over the years. I just think we're smarter and a little bit better at doing them, and I mean on both sides of the deal.”
More Knowledgeable
Bell said sellers and buyers simply have a better handle on how these agreements work.
“Just because we've done enough of them,” said Bell, who estimates the total number of whole bank buys now exceeds 80. “These deals have been proven as being very doable. If you look back over all the agreements that have been done, I think it's pretty hard to find any bad stories or bad results. I think that has driven these buys up the food chain and attracted more buyers and more sellers. That's a natural occurrence from a process that is more known and more proven.”
As the industry closes in on 15 years of these purchases, what stands out to bell is the knowledge level of buyers and sellers.
“Many years ago people didn't even understand these things, even think they were possible,” he said. “Now, today, you have people in both industries that have a very good grasp on what this is, so much so that bank shareholders and investors are well versed on this option. It’s taken a lot of time to build up that kind of confidence from everybody on both sides of the transaction.”
Where It All Started
Bell looked back on 2011, and the United/Griffiths deal.
“There was certainly a little naivete. Right? I was younger and more willing to push the envelope a little,” recalled Bell. “But, back then, when we did one deal a year, then maybe two and three, it never occurred to me these deals would become what they are today—much larger in size and number, national and grabbing a lot of attention.”
A large portion of that focus is coming from bank trade groups that argue the deals are not good for communities and steal tax revenue.
“Obviously, there's politics involved,” said Bell. “Some people are for it and some people are against it. But I'm not perturbed, scared or concerned about the bank trades’ attention. That's the case in everything we do. That just how the industries work.”