Olden Lane

In October’s newsletter we covered: • Why subordinated debt is an investable asset class • Why credit union members should be cheering the strategic merger boom • Current market dynamics and the Fed’s credibility • Rate implications and future yields • Comments on the NCUA’s proposed rules for Incentive-Based Compensation

“There’s a couple of ways to structure a bid, but there are some things you should think about. Please, if I could put one thing into the head of a credit union…” Michael Macchiarola reflects on his experience and what credit unions should consider when structuring a merger bid. Catch the full conversation on the most recent episode of the With Flying Colors Podcast, available now. 🔎 Search: “With Flying Colors” wherever you get your podcasts. Thanks for having us Mark Treichel.

The pace of consolidation in community banking accelerates, as a confluence of factors continues to pressure small financial institutions. The recent period has brought: (1) shifts in consumer preferences that demand maximum convenience and digital technology, (2) sophisticated fraud schemes and cybersecurity risks, and (3) increasing competition from nonbank financial institutions. Meanwhile, the high cost of deposits and regulatory pressure on fee income puts additional strain on profitability. Finally, the industry’s executive leadership is aging into retirement, forcing a difficult succession exercise in a tight labor market. Daniel Prezioso’s full commentary is included in our most recent newsletter. Access the newsletter and join our monthly email below 👇

Our goal is to provide credit unions the tools they need and to remove the barriers that have prevented growth, innovation, and overall stability. We're set-up to face this industry with patience and we're aiming to equip as many credit unions as we can, so that the industry as a whole is in a better position for the future. We’ve been meeting credit unions where they are for almost a decade now. If you could use our guidance, we’d love to help your credit union better serve its members.

In our latest whitepaper, Dipanshu Maheshwari summarizes the financial drivers that should be considered for merging credit unions. While many of our credit union clients have a goal to be active in credit union mergers, far fewer have developed a reliable system that monitors the market to bubble up potential opportunities as they arise. Our most recent (quick read) whitepaper describes a systematic approach to uncover potential credit union merger partners. Access the whitepaper below 👇

Some observations on the distribution of credit union assets over the past 10 years (Q2 2014 – Q2 2024): • The number of credit unions with over $10b in assets has more than quadrupled. These few institutions now control nearly 25% of all credit union assets, which has important ramifications for the nation’s credit unions, their 142 million members and the NCUA. • The number of credit unions with assets between $1b and $10b has nearly doubled (214 to 425). This cohort holds 52.1% of the industry’s total assets, a 10% increase during this time period. • Credit unions with less than $100M in assets continue to decline in their share of the industry’s assets. Although they still account for over 60% of credit unions, their share of total assets has shrunk dramatically from 10.4 % to just 3.6%! These stark shifts in asset concentration have important ramifications for industry participants. Our most recent newsletter explores in more depth ⤵️ #creditunion #creditunions #oldenlane #creditunionsrock

We recently submitted a Comment Letter to the U.S. Department of Treasury in response to the Proposed Guidelines concerning the disposition of Treasury investments made as part of the Emergency Capital Investment Program (ECIP).   We believe the agency did a fine job in describing the process by which it may ultimately sell an ECIP investment to the issuer or to certain qualifying third parties.   We’ll continue to monitor any developments to this important program for our clients. Read our full, four-page Comment Letter. Access below 👇

In the last 10 years, the number of credit unions with over $10B in assets have more than quadrupled. These largest credit unions now control nearly 25% of all credit union assets. At the other end of the spectrum, credit unions with less than $100 million in assets account for 60 percent of the country's credit unions (by count), but control only 3.6% of the industry's assets. A brief summary: • Against these pronounced trends, credit unions of all sizes should be realistic in assessing the future of their organizations. As a general rule, bigger credit unions enjoy a significant advantage in scale, which only grows with time. • Given this ongoing concentration, members should continue to enjoy greater benefits in the available rates on loans and deposits from the larger firms. • In light of these the trends, the NCUA should examine its existing resource allocation. While the agency continues to allocate substantial resources to overseeing smaller institutions, the dominance of larger firms creates special challenges which demand a reassessment of the agency’s attention and allocation of resources. #creditunion #creditunions #oldenlane #creditunionsrock

We're a unique financial services firm that works exclusively with credit unions. We are comprised of skilled technicians and we're strongly involved in the credit unions movement. When engaging with a credit union, we get to know them, to understand their business and needs. If there’s a fit, we’ll help the credit union through a pretty arduous process to gain the approval and raise the capital they need to continue growing their business. 

In our recent comment letter to the NCUA -- on its proposed Incentive-Based Compensation Rule -- we offer that the agency's best course of action "is to simply do nothing." Our general suggestions for improvement echo many of the concerns already expressed by various industry participants and advocacy groups. Most importantly, we emphasize that credit unions already regulate compensation and a one-size-fits-all approach for financial institutions fails to account for the significant idiosyncrasies in the credit union model.   To access a full version of our Comment Letter, see below 👇