Credit unions that have not struck bank deals have better net interest margins than their banking-buying peers, a new study from S&P Global Market Intelligence found.

In the first quarter of 2024, the median NIM for credit unions that have not acquired banks was 3.89%, S&P found. That compared with 3.20% for credit unions that have bought banks and 3.25% for community banks.

Median NIMs between the three groups historically moved largely in line with each other before a divergence that began in 2023.

There have been 12 deals announced this year in which a credit union is buying a bank, which eclipses the 11 struck all of last year.

But there has been a bit of a lull of late. No such deal has been announced since June 4 when ELGA Credit Union in Michigan announced it plans to buy Marine Bank in Florida.

But the news in the study was not all bad for buyers. Credit unions that have acquired banks have largely posted higher quarterly deposit growth rates compared with their credit union peers that have not struck bank deals, S&P found.

The deposit growth at credit unions that have acquired banks has also rivaled and sometimes even outpaced the rates at community banks.

“You’re not just growing in the actual deal with like assets and liabilities or the customers, you’re deepening and growing your product offering and skill set,” said Michael Bell, an attorney with Honigman who advises on many credit union-bank deals. “That kind of pays off over a term of many years.”

The S&P study also found the estimated deal premium for credit union-buying-bank deals announced since 2019 was 52.9%, considerably higher than the 21.8% median for bank-to-bank deals.

But paying up may be paying off in membership growth and other metrics for bank acquirers.

Credit unions that have struck bank deals greatly outpaced their peers on member growth since at least the fourth quarter of 2018, the study found.

“From just a pure growth trajectory, you’re always going to do better when you take two institutions with different specialties and put them together correctly. That is definitely going to propel faster than others.”

 – Charley McQueen
President and CEO
McQueen Financial Advisors