Credit Union REV set to acquire West Virginia bank
Record Breaking Bank Acquisitions by Credit Unions Continue
The financial sector is witnessing a remarkable trend as credit unions continue to acquire banks at an unprecedented rate. In a recent development, REV Federal Credit Union has announced its acquisition of First Neighborhood Bank, marking the 15th proposed whole-bank purchase by a credit union this year and bringing 2024 one transaction away from 2022's record of 16 announced whole-bank purchases by credit unions.
This acquisition will see REV Federal Credit Union gain more than 7,000 new members by adding First Neighborhood's five locations to its nearly 20 branches. The $1.1 billion-asset credit union, currently operating in the Carolinas, will expand its footprint with this transaction, venturing outside its traditional geographic boundaries for the first time.
The trend of credit unions acquiring banks has been on the rise, with 2024 seeing a record surge in such acquisitions. This shift reflects a strategic move by credit unions to significantly accelerate growth and expand into new markets.
Strategic Growth and Scale, Tax Advantages, Industry Consolidation and Competitive Pressures, Community and Member Commitment, and Challenges to Smaller Credit Unions are the key factors driving this trend. Credit unions pursue bank acquisitions to rapidly increase scale and asset size, which is more challenging via organic growth or traditional credit union mergers. The tax-exempt status of credit unions also provides a significant advantage, while the commitment to community banking often eases transition concerns during acquisitions.
The financial terms of the First Neighborhood deal were not disclosed. This is REV's third expansion in the last four years, and it's the first bank acquisition for the credit union. Michael Bell, a partner at Honigman, attributes the continued trend of credit union-bank tie-ups to the "macro pressure of being a small financial institution."
The acquisition of banks by credit unions has raised concerns among some community banks. The Independent Community Bankers of America (ICBA) has expressed concern over the recent increase in credit union-bank tie-ups, arguing that credit unions' tax-exempt status allows them to offer higher purchase prices than banks. ICBA CEO Rebeca Romero Rainey stated in May that the loss of community banks to tax-advantaged credit unions is a result of the burdensome regulatory environment and slow merger approval processes.
The National Credit Union Administration's bureaucratic obstacles and roadblocks make it more difficult for a bank to acquire a credit union than vice versa. There is no estimated time frame for the closing of the transaction.
First Neighborhood Bank had approximately $148 million in assets as of June. REV Federal Credit Union earned approximately $3.3 million for the first half of 2024, a 2% increase compared to the previous year.
This acquisition continues the ongoing trend of credit union-bank deals, confirming that this strategy is an intensifying dynamic in the financial services sector. The trend is expected to continue into 2025, with at least eight new bank acquisition deals announced by credit unions in the first half of 2025.
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