Credit Unions are Hot on the Bank M&A Trail

Credit Unions are Hot on the Bank M&A Trail

Credit Unions are Hot on the Bank M&A Trail

Just a few months into 2024 and 22 bank acquisition deals were announced. But, most significant, according to S&P Global Market Intelligence data of US bank deals announced in early 2024, is that credit unions were buyers in 27.3% of the US bank deals reported through March 18. That’s up from 11.1% in 2023.

The pace continued through early June, with now 12 US banks announcing plans to sell to credit unions, according to S&P Capital IQ. Those 12 deals are significantly close to the record high 14 deals that occurred in all of 2022. That year, $5.15 billion in bank assets were sold to credit unions. This year’s announced sales total $7.21 billion, well above the record high in 2022.


As community banks and credit unions offer similar core consumer products, acquiring a commercial bank can provide the credit union with:

  • access to new markets and geographic areas
  • a chance to diversify their balance sheet
  • additional membership
  • a chance to take advantage of a commercial bank’s digital technology and commercial lending portfolio.


Review your deferred comp plans before, during, after M&A

With the surge in credit union acquisition of banks, both the credit union and the bank need to dust off their deferred compensation plans. During the due diligence process, both parties will want to understand the plans, the terms and conditions related to the transaction, and fully understand how those compensation plans will affect the credit union and its executives post-acquisition.

It’s incumbent on the credit union to review not only what compensation plans are in place in the organization the credit union is acquiring, but also the credit union’s own plans to address competitive pay, benefit gaps and alignment with the acquired organization.

Credit union CEO compensation, for example, is highly correlated with asset size of the institution. When a credit union acquires a bank, the assets of the credit union will increase. This could result in a large adjustment to CEO compensation, which may factor into deferred compensation plans that are based on underlying CEO income levels.

“A credit union plan might be that compensation will grow at 5% per year, and they think they are being aggressive with their assumption,” said John Moreno, Managing Partner, Newcleus Credit Union Advisors. “If the credit union is very successful, it’s grown leaps and bounds and the CEO’s compensation actually has grown 8 or 9% for a significant amount of time, they are most likely far behind their intended benefit level.”

“When this occurs, you want to re-evaluate and recalculate quickly,” Moreno said. “While you wait, the more expensive the solution becomes.”


What to look for in an M&A  comp review

The issue of compensation equity between your current staff and those from the acquired organization requires a review and a plan. Executives who will be joining the credit union could have deferred compensation plans that far exceed what your team has and could create inequities that need to be addressed.

Here’s a template to use when reviewing compensation plans:

  • Review the original plan agreements and any amendments for terms related to change of control.
  • Review the original assumptions that went into the benefit calculations, including corporate or individual income tax assumptions.
  • Understand the impact of acquisition by a nonprofit entity.
  • Given the acquisition impact, does anything need to be done to the comp plan(s)?
  • For the credit union – how do you want to address any inequality in plans held by incoming executives versus your incumbent staff?
  • Post acquisition, the credit union should evaluate executive compensation of the combined organization. Compensation and/or deferred compensation adjustments may be warranted.

“In the acquisitions we’ve been involved with where a credit union is buying a bank, we’ve been able to help both sides understand the impact of the acquisition on each of the parties across the spectrum of compensation and deferred compensation,” Moreno said. “We achieve this by having comprehensive compensation expertise within Newcleus in addition to our credit union-focused practice.”

Newcleus compensation and credit union advisors can help you calculate the impact of existing compensation plans and reveal insights and options that could help create an M&A experience that is more effective, more productive and value based.

For more information, contact us.

John Moreno
Managing Partner, Newcleus Credit Union Advisors


Tedd Meyer
Director, Newcleus Credit Union Advisors