Could 2025 Bring More Credit Union Deals?

The next year is widely anticipated to bring a more favorable environment for bank M&A — could more credit unions be among the likely buyers? 

A relatively recent phenomenon, credit union acquisitions of banks have become a contentious topic in the industry. More than three-quarters of executives and directors who participated in Bank Director’s 2025 Bank M&A Survey believed that credit unions should be banned from buying banks. 

But as controversial as they are, they’re also proving to be rather popular — at least among the banks that take part in these deals. According to data from S&P Global Market Intelligence, there were 20 credit union acquisitions of banks announced through Nov. 22 this year, representing a significant uptick in recent trends. That compares with 11 bank and credit union deals announced last year, 14 in 2022, 11 in 2021 and six in 2020. 

Bank deals appeal to credit unions for several reasons. Often, a bank acquisition can be an entry point into commercial lending or a means of expanding a credit union’s field of membership. Credit unions like bank deals as a way of adding more branches. Credit unions will often retain most of an acquired bank’s employees because without shareholders, they have a longer period of time to realize cost savings from a deal. Sellers can appreciate the concern for their employees. 

But for banks that sell to credit unions, the price is the major source of appeal. While much of that data is not publicly available, it’s also not uncommon for a credit union to pay as high as 150% of tangible common equity. 

“There are a lot of bankers who say they’re opposed to this and when it comes time to sell, they say, ‘I want to call a credit union because I want to maximize my price,’” says Kirk Hovde, managing principal and head of investment banking with Hovde Group. 

Of course, there’s some nuance behind those hefty premiums credit unions pay in these deals. Credit unions cannot own bank charters, so these acquisitions are actually purchase and assumption agreements. A credit union may be able to pay 1.5 times tangible book value, or even more, but the deal will also carry additional tax liabilities for both the acquired bank and any shareholders at its holding company. 

Among banks that could be open to selling over the next five years, 91% said they would accept a minimum price of 1.5 times tangible book value or higher, according to Bank Director’s 2025 Bank M&A Survey. Meanwhile, only 40% of potential buyers said they would pay up to 1.5 times book value. 

The fact that credit unions are able to pay higher premiums is an understandable source of frustration for bankers. “If they are interested in making an acquisition and competing against a credit union, they feel like the credit union has an opportunity to pay a higher price if they’re not paying taxes,” Hovde says. 

However, Hovde notes that he’s also worked on many deals where bank buyers won out over credit union bidders. “Every deal is different,” he says.  

The uptick in credit union-bank acquisitions is certainly driven by an increasing need for scale. Greater regulatory burdens and compensation costs are making it tougher for very small banks to stay in business, and it’s also difficult for banks under $500 million to make a cash offer for another bank, advisers say. 

In many cases, very small community banks may not have any other prospective buyers besides a credit union. “There are a lot of small banks, and when you look around the Midwest in particular, there are a lot of small rural banks, where a lot of other banks don’t have an interest in buying that bank,” Hovde says. 

Still, credit unions have their own limitations. Credit unions almost never compete to buy banks close to or over $1 billion in assets, Hovde says. Among 61 credit union-bank deals that took place since 2020, just two involved banks with more than $1 billion in assets. A majority of those target banks were under $500 million in assets. 

The broader environment for bank M&A is expected to become more favorable in 2025, as many in the industry anticipate a friendlier regulatory environment and potentially lower taxes with a new presidential administration. Already, banks are experiencing a rebound in stock valuations. The Bank M&A Survey, which was conducted in September of 2024, found a significant year-over-year increase in the percentage of publicly held banks who felt their bank’s stock was strong enough to make a deal that fit their criteria. 

So far, a handful of states, including Mississippi and Colorado, have taken measures to prevent credit unions from buying banks, according to news reports. Absent any broader legislation prohibiting credit unions from buying banks, these deals are likely to continue apace, though they could be tempered by market forces. 

“I don’t know if you’ll necessarily see a significant uptick [in credit union-bank deals] because valuations of bank stocks now bring public buyers back into the mix,” Hovde says. “It allows banks to be willing to and able to put a more attractive offer on the table than where they were 12 months ago.”