Bank M&A Watch: Elevation Buys Cache Bank and Trust

September 4, 2019 | Community Banking, Insights

It’s the 13th deal this year between a credit union and a small bank

Bank M&A is heating up, and credit unions are leading the way.

This week, Elevations Credit Union announced that it is buying the assets of the $120-million Cache Bank and Trust in Greeley, Colorado. The target bank specializes in commercial lending.

The bank has three branches and about $126 million in deposits. Elevations President and CEO Gerry Agnes said the company is fulfilling its long-term vision to serve northern Colorado. Agnes said that the deal will allow it to expand its commercial lending, business banking, consumer banking, and mortgage businesses.

Bank M&A Picking Up

This is the 13th merger between a credit union and a small bank this year.

Some bankers are not very happy about this trend because credit unions have substantial tax advantages over banks, and that provides them with more cash to make deals.

American Banking Association Rob Nichols recently criticized the Credit Unions. “ Credit unions are increasingly using their tax advantage to expand membership with higher-income customers, make high-risk loans without adequate capital, and even buy up tax-paying community banks,”  he said. “As the report (by Federal Financial Analytics) makes clear, a lax regulatory framework is allowing this to happen, and the biggest losers are taxpayers and people of modest means whom credit unions were created to serve.”

My Take on Credit Union M&A

Now, as a bank stock investor, I am happy to see any new entrant into the M&A arena.

For example, one of my banks, Ben Franklin Financial (BFFI) of Arlington Hills, Illinois recently sold to a credit union. Give my opinion of bank management’s ability to turn a profit, I was pretty happy to see a buyer emerge no matter what type of financial institution it was.

Now there are a few things worth noting.

First, the deal must be structured as a purchase and assumption transaction where all the deposits and loans are transferred. After this, the bank simply shuts shop when the deal closes. Another potential issue, cited by detractors of Credit Unions buying banks, is that banks are taxpayers and credit unions are not. Due to this reality, some local tax revenue disappears.

This trend of credit unions buying banks is not going away. Credit unions are growing faster than many of the heavily regulated community banks. As a result, the credit union’s appetite for future M&A will remain strong. B

While bankers have appealed to for regulatory intervention, government agencies do not appear willing to act.

Finally, I sympathize with the banking industry. The business is subject to far more regulatory scrutiny and pays taxes at nearly every level. However, as an investor, I am open to selling a bank out of my Banking on Profit portfolio to anyone offering me a profit.

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