In a move that signals the continued reshaping of the financial landscape, NuMark Credit Union, based in Joliet, Illinois, announced its decision to acquire Lemont National Bank, located in nearby Lemont, Illinois. The $850 million-asset credit union, which has been expanding its footprint across the Greater Chicago area, plans to close this all-cash deal in the second half of this year. If the transaction goes through, it will mark NuMark’s second acquisition of a bank in recent years, further solidifying its position in the competitive banking sector.
The proposed acquisition follows a broader trend where credit unions have increasingly turned to bank purchases as a strategy for growth and expansion. In this case, NuMark Credit Union is aiming to expand its asset base from $850 million to $910 million, while also increasing its branch network from 13 to 15. This aligns with a larger movement in the industry, where credit unions, typically smaller community-focused institutions, have been acquiring local banks to bolster their scale and service offerings.
A Growing Trend of Credit Union-Bank Mergers
NuMark’s latest move comes after a record-setting wave of credit union-bank mergers in 2023, when 22 such deals were announced. The trend had been accelerating as credit unions sought to expand their business lines, extend their geographic reach, and gain more competitive advantages in a rapidly evolving financial services market. This acquisition marks NuMark’s second bank purchase following its 2023 acquisition of Pioneer State Bank in Illinois.
However, 2024 has seen a notable slowdown in these deals. Following the 22 mergers last year, only one such deal has been announced so far in 2024—the $1.4 billion-asset Frontwave Credit Union’s plan to acquire Community Valley Bank in Southern California. This decrease in activity has sparked speculation among industry watchers about the future of these transactions.
Credit Unions Seize Opportunities Amid Bank Struggles
The motivation behind these credit union-bank acquisitions lies in a combination of factors, including the ongoing struggles of small banks to compete with larger financial institutions. As banks face increasing pressure to modernize their technology, many smaller, community-based banks find themselves unable to keep up with the rising costs of technology upgrades. In this climate, credit unions, which typically operate with lower overhead costs, have stepped in to offer all-cash deals for struggling banks.
For credit unions, these acquisitions present a chance to increase their assets, grow their customer base, and expand into new geographic regions. For the banks being acquired, selling to a credit union can often provide a simpler, more straightforward exit compared to negotiating with larger banking institutions or private equity firms. This trend has led many small banks to consider credit unions as attractive buyers, especially given the relatively smooth and quick nature of these transactions.
Regulatory Hurdles and Pushback from the Banking Industry
Despite the clear benefits for both sides, credit union-bank mergers have faced increasing opposition from some sectors of the banking industry. Critics argue that credit unions, which are tax-exempt organizations benefiting from their mission of serving people of modest means, are diverging from their core purpose when they acquire banks and operate like traditional financial institutions. These critics suggest that when credit unions grow too large, they risk becoming indistinguishable from commercial banks, contradicting their tax-exempt status.
This opposition has led to concerns about regulatory approvals for such deals. The pushback from banking industry groups, as well as questions about whether these acquisitions truly align with credit unions’ core missions, has contributed to the slowdown in credit union-bank mergers in 2024. Even institutions that were initially considering a sale to a credit union, like Bank of Idaho, have opted out of such deals, citing uncertainty around regulatory approvals.
While credit unions maintain that they are simply preserving local financial services by acquiring banks, rather than selling to out-of-state or larger institutions, the debate continues. Mike Bell, an attorney who advises on credit union-bank deals, believes the slowdown is only temporary, asserting that many credit unions are still actively negotiating acquisitions this year. According to Bell, “I’ve never been busier,” which suggests that the demand for such deals is still strong, even if it has temporarily tapered off.
Looking Ahead: The Future of Credit Union-Bank Mergers
Although the pace of credit union-bank mergers has slowed in 2024, the underlying trend remains clear. Credit unions continue to eye bank acquisitions as a means to grow and provide more diverse financial services to their communities. As smaller banks struggle to keep up with technological demands, credit unions, with their cooperative and community-focused model, offer an appealing alternative for a local, all-cash exit.
However, this growing consolidation of the banking sector raises important questions about the long-term effects on competition and the financial system as a whole. While credit unions argue that their acquisitions help preserve local services, critics caution that credit unions should be closely monitored to ensure they don’t outgrow their original mission.
As the year progresses, it will be interesting to see whether regulatory hurdles or industry pushback continue to slow down these mergers, or if more credit unions will seize the opportunity to expand through bank acquisitions. In the case of NuMark Credit Union, this deal represents an exciting next step in its growth and its commitment to putting people and community first. If the transaction goes ahead, it will undoubtedly strengthen NuMark’s ability to deliver more personalized and efficient financial services to the Greater Chicago area.
Ultimately, credit union-bank mergers will likely continue to be a key feature of the financial services landscape, offering opportunities for both credit unions and small banks to adapt and thrive in an increasingly competitive environment. As long as the trend aligns with the values of community banking, it could pave the way for a more diverse and resilient financial ecosystem.
