Bank advisers agreed with the acting comptroller of the currency's recommendation to include credit unions in market share reports for bank M&A reviews.
During an event in February, Acting Comptroller Rodney Hood, a former chairman of the National Credit Union Administration, said he would recommend to the US Justice Department that credit unions be included in market share assessments when conducting reviews of mergers between banks. Some bank deal advisers think it is a long overdue idea.
"It's almost mind-boggling, logic-defying that credit union deposit shares aren't taken into account because they are serious players and competitors in a lot of markets," John Gorman, partner at Luse Gorman PC who represents financial institutions on M&A, regulation and other topics, said in an interview.
However, the trade association America's Credit Unions believes that keeping credit unions out of the market share reviews for bank deals makes sense. If credit unions were included, it would become more difficult for the Justice Department to prevent the formation of bank monopolies, said James Akin, the head of regulatory affairs at America's Credit Unions.
"The existence of credit unions doesn't counterbalance the risk of oversaturation of the banking industry," Akin said in an interview.
Carrie Hunt, chief advocacy officer at America's Credit Unions, said credit unions are not "a true competitive threat to banks."
"It's our not-for-profit, member-owned structure with a defined field of membership, which is a big part of that, and it is also how credit unions operate," Hunt said in an interview.
However, not everyone believes that credit unions are much different from banks. Cadence Bank Chairman and CEO James Rollins III said credit unions offer the same services as banks.
"They make commercial loans. They make consumer loans," Rollins said in an interview.
The executive also noted that credit unions have some advantages because they do not have to comply with certain bank regulations such as the Community Reinvestment Act. In addition, "they don't play by the same fair lending rules we play by. They don't pay any taxes," Rollins said.
Rollins believes that credit unions should certainly be considered in bank M&A market share reviews. "The fact that when we're looking at market consolidation within banking, and you don't look at credit union assets — that doesn't make any sense to me," Rollins said.
Market share analyses serve as a deterrent for banks that are interested in pursuing a deal. "I suspect there have been many that would have wanted to take action on a proposed transaction but did not as the likelihood of approval was low," Rollins wrote in an email.
Honigman LLP's Michael Bell, head of his firm's financial institutions practice and an attorney who has represented credit unions in many acquisitions of banks, said credit unions should be included in market share reports when considering bank mergers. Bell said he has even made this argument to regulators.
"We have successfully argued for and had it considered, and I believe it gave us a more accurate representation of the issues," Bell said in an interview. "And I think that's what everybody would want."
Although the overwhelming majority of credit unions have fewer than $10 billion in assets, bank advisers say they bring a competitive presence to the market of financial institutions. The largest by far was Navy FCU with $180.81 billion in assets as of Dec. 31, 2024, and the second largest was State Employees CU with $52.99 billion in assets. The smallest credit union in the top 20, GreenState CU, had $10.64 billion in assets.
Excluding credit unions from geographic areas can distort the outlook for a pro forma bank by underestimating the competition, said Robert Maddox, a partner at Bradley Arant Boult Cummings LLP and a bank deal adviser who represents clients before regulatory agencies.
"Your analysis is going to be off," Maddox said in an interview.
This is consistent with Hood's argument that omitting credit unions when reviewing market share in bank mergers can lead to inaccurate assessments.
"It means that your results are skewed," Hood said at the February event. "And it may appear as if you're going to have this 50% market share, where if we could include the market share data for the credit unions, you would be able to get those mergers approved in a timely manner."
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