U.S. Eagle Federal Credit Union in Albuquerque — New Mexico's largest market — plans to acquire cross-city rival Southwest Capital Bank in a bid for business line expansion and scale.
The deal marked the 14th this year involving a bank selling to a credit union. It put the industry on track to set an
It also added to a growing tally of bank M&A overall this year as pent-up demand steadily unfurls, industry observers say. Through July of this year, 67 banks announced plans to sell, according to S&P Global Market Intelligence. Those transactions had an aggregate deal value of $9.25 billion, far more than the $4.15 billion for all of last year.
Robert Bolton, president of bank investor Iron Bay Capital, said that after a sluggish 2023 — only 100 deals were announced, and most of them small — buyers have returned to the M&A market and more are expected to follow suit through the second half of the year.
A surge in interest rates over the past two years drove up borrowing costs and raised the potential of a recession, creating uncertainty for dealmakers and curbing activity. But Bolton said a Federal Reserve interest rate cut is widely expected in September. It could set in motion a series of rate reductions, he said, lowering credit costs and supporting the economy. This gives bank buyers more confidence in their macro outlooks and, by extension, their ability to make acquisitions.
"No question, there are more and more deal talks this year," Bolton said.
Several more deals have been announced so far in August. The $1.5 billion-asset U.S. Eagle's play for $475 million asset Southwest Capital was the second credit union-bank merger of the month. The $5.8 billion-asset
U.S. Eagle said its planned acquisition of Southwest Capital, slated to close in the second quarter of 2025, was expected to bolster the credit union's cannabis lending operation. The buyer noted that the recreational cannabis industry is growing quickly in New Mexico and is in need of increased banking services.
Both companies offer services to cannabis businesses, including checking and savings accounts, cash handling and small business loans.
"This acquisition will expand our services to a greater number of people and contribute significantly to U.S. Eagle's growth for years to come," Kevin McMahon, chairman of U.S. Eagle, said in a statement announcing the transaction.
The acquisition would also give U.S. Eagle a presence in the New Mexico markets of Las Vegas, Mora and Pecos. Deal terms were not disclosed.
Credit unions are buying banks to
The deals, while increasingly common, are also controversial.
Bank trade groups argue that credit unions are unfairly capitalizing on their federal tax-exempt status when they buy for-profit banks. Credit unions historically served underbanked markets, focusing on consumers. But as more of them buy banks, they are expanding their territories and entering new areas, notably commercial lending, that put them in direct competition with tax-paying banks.
Credit unions also remove government tax revenue when they buy banks, the Independent Community Bankers of America said.
"ICBA and the nation's community banks have repeatedly warned about the dangers of tax-exempt credit unions acquiring tax-paying community banks, and this dangerous trend is only accelerating," ICBA President and CEO Rebeca Romero Rainey said in a statement.
Credit unions counter that when they buy banks, they are keeping and strengthening local financial services.
"When banks realize they are unable to continue their operations, a credit union is often a natural partner to consider. Instead of leaving consumers high and dry because they can't turn a profit, banks often make the decision to sell to a credit union to ensure a healthy financial institution remains in the community," Jim Nussle, president and CEO of advocacy group America's Credit Unions, said in an
Southwest Capital is the first New Mexico-based bank to sell to a credit union this year. Last year, Albuquerque-based Nusenda Credit Union announced plans to acquire Las Cruces-based Western Heritage Bank.
