Credit Union Exam Solutions Presents With Flying Colors

Treichel: Hey, everyone, this
is Mark Treichel with another

episode of With Flying Colors.

I'm excited to have a special
guest today, Mike Bell of Honigman.

Mike, how are you doing today?

Mike Bell: Good, Mark.

I'm happy to be here.

We've done this before, but there's
always new stuff to talk about.

And there's a lot of things happening
this year at a great intensity.

So I look forward to talking about it.

Treichel: Yeah, that's great.

For those of my listeners who may not
have heard our previous discussions or

may not be aware of what it is you do
in the credit union arena, could you

give a little bit of your background?

Mike Bell: Yeah, Mark, I'm happy to.

To keep it simple and this happened
by accident to be honest, but I've

worked my way into a situation where
I have credit unions across the

country, in every state by things.

So we're buying whole banks, bank
branches, and then all sorts of

other businesses, whether that's
a title company, an insurance

business, a specialized lender,
mortgage servicer, you name it that

kind of ancillary business group.

Is one end and then hold banks
to the other end of the spectrum

of things that we're buying

Treichel: very good, and it's funny
because in my conversations with

clients or potential clients just
general conversations with credit

unions, occasionally it'll be coming up.

Hey, we're thinking about getting sub
debt and the purpose is going to be to

buy a bank or it'll be, hey, we're in
the process of possibly buying a bank.

And inevitably, I'll say, is there any
chance you're working with Mike Bell?

And I don't think anybody
said no yet to that.

So that's a good sign.

That's a good sign for you.

Business seems like it's well for you.

So that's great.

So let's talk a little bit about, I
think last time we chatted, things

had slowed down a little bit and
there was a period maybe during the

pandemic where things had slowed down.

But.

In the green room, as we were
pre chatting, it sounds like

things are hopping quite a bit.

So maybe give a bit little
bit of the landscape of what

it is you're seeing here.

So far in 2024.

Mike Bell: Yeah, I'm happy to market
and to be clear, we know you can look

backwards and we've been doing these and
kept doing them through the pandemic.

No question, but it did slow down.

And what is occurring now?

The pressures or forces that make
a seller sell and by the way,

I'm speaking to any business.

I'm not isolating just whole banks,
really just kind of sellers in general.

They exist today as much
as they ever have before.

Right?

And they existed through the pandemic.

But people didn't sell anyways,
because of other forces.

And then the forces that have
buyers wanting to buy exists

today, just as they have forever.

So we're in a situation where
there's pent up demand that

exists from the last few years.

And then there's the normal demand
that's present, for this year

for getting what's behind us.

Put that all together, and we just
made a suit of intense activities.

So anecdotally, right?

I'm not giving you an exact statistic,
nor can I, but anecdotally, if I said

to you, hey, Mark, in a typical week,
if I looked at my list of things that

I'm in the middle of putting together
in the middle of the years where it's

been wild, where we set records, I would
say, man, there's like, 6 to 8 things.

I'll tell you Mark right now.

That number is over 20, but
it is beyond understanding.

Essentially, I would never guess that
this it couldn't have been predicted, but

it's that active and here's what's wild.

If you look at the articles in American
banker or national publications,

we'll talk about the remaining or the
continuing slow down and bank to bank.

I don't disagree with that.

I do think that that remains challenged.

But where we are at the small end of the
market, the smaller end of the market,

or with the bank branch situation, or
with other businesses, those slowdown

forces aren't as present and we're going
faster and more than we ever have before.

It's pretty astounding,

Treichel: And that's interesting because
I know there's, earlier this year,

FDIC came out with guidance and or
a proposed rule on how they're going

to be handling mergers going forward
and maybe as an effort to clarify,

the analysis they'll do, et cetera.

And it seems like it's possible
that that is playing a role in

bogging down what's happening on
the bank to bank side of things.

You think that's accurate?

Mike Bell: I do.

So I had, I was fortunate enough
maybe a few weeks ago I did a

podcast or a video with the ICBA
and I loved it and I wanna do more.

And, we were talking about this
very thing, and I'll tell you, I

do think that today as we sit here.

The FDIC has gotten itself in such
a situation that banks are not

merging with banks, or they're
pulling out a bank to bank deal

because it's ground to such a halt.

There's such a risk that
it's going to take so long.

No 1 wants to do business in that way.

How that impacts us.

For years, as we did these, the
conventional wisdom was, all right,

well, if you are going to sort of
credit, you do need to be prepared

for another month to month and a half.

Regulatory approval versus if you sold
to a bank that now is completely untrue.

So, as we sit here today, we're
just as fast or actually faster.

Then bank to bank combinations,
which, by the way, I think it's

completely unfair to banks.

I don't think it should be that way, but
that's what's occurred subject today.

We're not necessarily seen as the better.

That's going to take as long or longer.

And that's a huge advantage for us.

Treichel: Yeah, it went from being
a disadvantage to credit unions

to now banks when they see credit
unions are bidding it's a positive.

That's fantastic.

That's fantastic.

Mike Bell: Or neutral at worst, right?

Treichel: Or neutral at worst, yeah.

All you can hope for is a
level playing field, right?

Mike Bell: Yeah, because for years
I engaged in conversations where

the selling bank would be like,
You guys have 45 or 60 days longer.

We need to make sure that
they understand that.

And I mean, that was just
kind of the speed bump.

We fought for 12 years, right?

It's gone away.

It's not present in
our conversation today.

Treichel: Well, and the other,
thinking back to our conversations

and some things I've learned in some
other podcasts, when a credit union

buys a bank, it's an all cash deal.

Cause, cause there is no stock that
can be offered as the alternative.

And to me, if I had a bank, if I was
fortunate enough to own a bank or be

one of the owners of a bank I think
I'd almost prefer cash over stock.

And a lot of times banks buy one
bank with stocks of the surviving

bank, if I recall correctly.

Mike Bell: Yeah, so you just I think
inadvertently walked into another trend.

I wanted to talk about, but go for it.

Go for it.

So, where we are in the economic
cycle, right, and actually has nothing

to do with our industry necessarily,
but where we sit today, cash is king.

So due to the fact that bank
stocks are impaired, there's

been some tumble, with values of
banks, their currencies affected.

I'm saying, as we sit here,
sellers are have a preference for

cash because that value is known.

It's a certainty.

Now, that's nothing that we cause that's,
it's just a fact 4 or 5 years ago.

We were fighting to engage with
cash, because stock was preferred

for where we were in the cycle.

But I will tell you today, there are
arguments out there that, credit unions,

overpay, they're winning every deal.

Well, those are both completely false.

I'll tell you that, but I will say that
we do have not an advantage, but our

currency is a preferred currency today.

Which might be why you're seeing
a little success, not necessarily

because we're paying more overpaying.

That's not happening.

Treichel: Yeah.

Liquidity.

Every conversation I have with the
credit union liquidity is a focus that

institution for the obvious reason
of what's going on in the economy.

So when you can get cash in a deal
today, it definitely is an advantage.

So bank branches.

I think within the last week I saw
maybe you were posting or you liked

something on LinkedIn, but there was
a reference to some bank branches.

Branch purchases that have been going on.

Could you kind of walk through
how that process works?

How do you find out that these are, that,
bank X is caught in, in pick a state,

Texas is looking at selling and then how
do you connect them with potential buyers?

Mike Bell: Yes, so so the bank branch to
itself, just to start, just so everybody

understands we're not talking about.

A close vacant bank branch of the
real estate deal, just to be clear,

a bank branch student, when I say
that, and when you see the ones

that we've been announcing, and the
transactions we're involved with.

It's like a mini bank deal.

We're definitely getting the
real estate in the picture.

So can you wrong?

But we're getting the employees, the
loans and the deposits we're excising or

surgically removing a part of the bank.

And taking ownership of it, so
it's a mini bank deal, just so

all the listeners understand.

And then 2nd, I'll tell you,
it's a bit fragmented, right?

There are banks that will never
sell branches that are banks

that will just close them.

They're basic, we'll try to sell them
by themselves, but in essence, I think

a majority of the transactions will go
through the funnel over the channel.

The traditional whole bank deals go
through, so they'll hire an investment

banker and that investment banker will
try to find a buyer for the branches.

When that occurs, that's where I get
involved, so there's investment bankers

across the country that are very aware
of credit unions and credit union buyers

and my clients and they reach out to me
at the very beginning to see, who might

be interested or who they should talk to.

And I'll tell you, Mark, that last
year I joke, but, we, my offer myself,

we read the world and the number
of grants deals done by lawyers,

and we did 3, which is hilarious.

This year already in May, we just
announced a transaction yesterday

announced 1 a couple of weeks ago.

I think we're at 5 or 6 for the year.

And there's more coming, so there
is 100 percent of trend today.

Banks looking to gain efficiency to
right size, pick the word you want.

And then there are buyers that
are very interested in being

partners and buying in those deals.

Let me add 1 final point just to
emphasize what this does for a seller.

So, if you're a bank.

And you're going to sell some branches and
you answer to shareholders as you should,

when you engage in a branch transaction,
there are 2 things that you get to say

your shareholders rather instantly.

Right?

And it's a big deal.

1, we just got more efficient.

2, we made a little bit of money
while we were getting efficient.

Those are very compelling mark to
shareholders as you can imagine.

And so these transactions, I'm in full
again where we are in the economic cycle.

I'm saying right now we're in
the cycle where it is happening

time after time after time.

Very active today.

Treichel: And then, it seems
historically, 1 of credit

unions arguments about how they.

Fulfill their mission of serving people
of modest means is these scenarios where

banks pull out of areas and you have a
financial institution desert, if you will.

And oftentimes credit unions
are the last to pull out and

or expanding into those areas.

So these are situations where if
Perhaps the spinoff didn't work

for a credit union to buy them.

Those individuals would have less
choice in that community and the

credit unions are stepping up to better
fulfill the needs of those what will

now be members et cetera, et cetera.

Anything on that?

Mike Bell: That's 100 percent correct.

Like, so I admit that beyond the
economics that I was getting excited

about these branch deals are 100
percent feel good stories based on fact.

So as an industry, credit
unions are net branch openers

banks or net branch closers.

And I'm not saying 1's right or wrong.

I'm just saying, as industries,
that's absolutely fact.

You can look at the transactions
announced this year, and you can see

that many, many of the transactions
are dealing with branches in

rural or very small communities.

And 1 of the reasons we're
buying is to keep them all back.

Right?

I never, I've never done a range
deal where my client's like, yeah,

we're going to close the branches.

That's nonsensical.

So, they are 100 percent buying
them to keep them open and they

work for our business model.

So, actually, it was a real win win.

And again, I was talking
with the CBA about this.

This is all good.

Right?

Banks are getting more efficient.

They're making some money.

Branches are remaining open for
what it's worth and communities

that need to be served.

We're each playing our role.

And I don't think that's
anything to laugh at.

That's that's a good win win situation.

Treichel: It's a win win, and it's a
win win in addition to those employees

who end up having to go look for a
job, even though, unemployment's at

all time lows, they say, but the.

The knowledge and the historical the
historical knowledge of that branch,

for example, is something that picking
those folks up is very helpful to

the new institution the credit unit.

Mike Bell: Yeah, no question about

Treichel: it.

So you talked about title
companies and other acquisitions.

Could you go into, maybe a list of
other things that people are buying?

And then maybe we can have
some followups tied to that.

That intrigued me a little bit,
like buying a title company.

How does that all play out?

Mike Bell: Yeah, this segment
of the business is a little

more scattered, right?

So there are not necessarily investment
bankers or people out there that

consistently are in this space,
bringing these things to market.

So it's more challenging in that regard.

But I'll also tell you that I do
think there are some strategies or

ways to get yourself present in the
market to the extent you're able.

And I have this belief I can't give you
a statistic, but I can give you again,

anecdotal or logical or common sense.

I think people are
going to relate to this.

If you go to your chamber of commerce,
Lions Club, rotary name, right?

Community meeting.

And you look around the room and
look at the people that own the

title company, or the insurance
company, or the investment business.

What colors their hair, right?

And that's not a good or bad.

It's just a fact.

And I have seen a mass movement, a mass
movement towards people retiring that all

these businesses are great businesses.

And we're buying them in February of
this year mark unrelated to anything up

and down and across the United States.

I have 4 different credit unions, buying
4 different title companies, all of which

the folks that own it were retiring.

Right?

That just gives you a sense.

Now that hasn't duplicated itself
in April or May to be clear, but

that gives you a sense of what
I'm saying with these businesses.

And I'll tell you.

What I say to credit unions, I am not
saying you should buy a title company.

Right?

I didn't say that.

What I am saying, though, is you
should think about do you want to

be in these ancillary businesses?

Do you want to do insurance
investments title?

Whatever.

Because if that's a yes, then I
am saying to you, this is a time

to keep your eyes open and perhaps
buy, buy something in that business.

These things.

If you look at what I would call
your standard community bank or

today, your standard community
based credit union with some size.

We're in those businesses.

They're in these businesses.

I mean, companies have been
in these businesses forever.

And I think more and more getting into
them due to the pressure on non interest

income and all the other things going on.

So I do implore your listeners
to simply examine their strategy.

Do they want to be in these things or not?

And if that answer is less, well, then
I'm saying economically, this is the

time to look around you and see what
might be for sale or to see if you can

effectuate any sort of buys or sells.

Because it's real right now, there's
a ton of activity in that space.

Treichel: Well, and it's like the small
credit unions who have the CEO who has

the gray hair who then decides, okay,
board, I'm retiring, what do we do?

And it ends up leading to a merger.

So it makes sense that the
small businesses would be facing

that, that same challenge.

And a challenge for one is
an opportunity for another.

So,

Mike Bell: if you are a very
large, I don't care, a billion,

two billion, two billion.

You have challenges hiring talent.

I promise.

Imagine if right with a local
title company or or a small or

a smaller business, like this
succession planning talent type.

Challenge in our industry.

Lives up and down the scale and
I think it actually is obviously

more pronounced and worse.

It was the bottom end of the scale.

So that is certainly driving or is a
driver of some of these options for sure.

That's real.

Treichel: And you talk about, exam,
you should be examining your strategy,

not leaving these opportunities for,
say acquiring a title company, now on

the bigger end back towards the, hey,
I, I think I might want to buy a bank.

When someone reaches out to you
the first time saying, again

I'm in, I'm a credit union.

I'm a 3 billion credit union
and thus in such state, and I've

never contemplated buying a bank.

I'd like to talk to my, so
let's say this is the CEO.

He reaches out to you.

I'd like to talk to my board about this
opportunity, but before I do that, I'd

like to understand more what I should
be thinking about, the pros and cons.

So when someone reaches out for
you the first time relative to that

what's that first conversation like?

Mike Bell: Yeah, so I have,
because that happens market,

it's happened now for 14 years.

Right?

So we, today, as I sit here, I'm
the beneficiary of having that

conversation now, 2 or 300 times.

I have to sit down until about
45 minutes where we can walk

through a right about what is it?

How does it work?

What's the math?

Why do my peers do it?

And why don't my peers do it?

Because there are 2 sides of the fence.

And I explained to that CEO, look, I
prefer you if it's you and your C team

or your board or a combination, whatever
you want to do, but give me 45 minutes.

Let's walk through this thing.

And I think at that point,
you can decide not for us.

Yeah, let's go deeper
because there's more to do.

Right?

We don't solve it, but we get enough
out that I think you can make an

informed decision to want to save me.

I realize I don't.

And Mark, I'll just add, if you look at
the list of the top 30 credit unions in

the United States of America by size,
I've probably talked to most of them.

Not all of them, most of them.

And I think you could say it's
50, 50 or 60, 40 of those that

are like, yep, this is for me.

And those that are like, this isn't for
me, I think both of the right answer.

I'm not an advocate for do this or else.

I'm an advocate for get it in front
of you and then make that decision.

Treichel: That makes sense.

And as as you're walking through
that I've moved around the country.

I've bought and sold a lot of houses
and got, gone on official house hunting

trips when I got relocated with NCUA.

And, I'm just thinking about going out
with the realtor and the first day you

go out, there's three or four houses and.

You might not like any of them, you
might like one of them, you might even

put an offer in and get out bid or
not get it, especially, more recently,

and I'm guessing that if somebody is
interested, it makes sense to not wait

to, hey, I might be interested in 18
months, so I'll call Mike in 18 months.

You'd be better off having that 45
minute conversation today because

the odds are, like you said, the
credit unions aren't outbidding

every institute, every situation.

I'm sure that every first bid by a
credit union is not successful and it

helps them under once they go through
at one time, they understand the process

better and might make them better
prepared for their 2nd offer for a bank.

Is that an accurate story?

Mike Bell: Yeah, so 1st,
I didn't have to comment.

Your analogy is so accurate that.

If you heard me talking on the
phone and didn't know what I

did and didn't listen to all the
words, you think I was a realtor.

That's honestly truthful mark.

It just has to be banks.

But that's how it sounds.

Second, so these things have a timeline.

So if a clear Union calls me and
says, Hey, Mike, we're learn about

this, we're doing X, Y, and Z and we
really can't do this for 12 months,

I would say, I'm glad you called.

We could start now.

We're not gonna, if we do some,
we're gonna own this thing

for a year and a half anyways.

So that's a correct point.

Second this is not like my hair
was on fire and urgent, urgent.

But if you think you want to be in
this game where you're dabbling, I

would say now is always the time to
get in once something sold, it's gone.

But also there's so many sellers today.

There's so much activity.

I think pricing is
advantageous for buyers.

It's a buyer's market in my opinion.

And so it's a good time to get
in and then the last thing I'll

say, we'll make a good point.

We do the 45 minute thing.

We get smarter.

Once we actually engage in a
process, even if we lose or we're

unsuccessful, it is 100 percent true
that you have gained an education.

There's no question about it.

When we walk through that 1st,
1, and we go through the 1st,

3 or 4 steps, even though we
don't make it to the finish line.

I explained, look, we are better.

You are going to be that much
better when we go try number

2, 3 or 4 because we absolutely
have gained some real knowledge.

And I'll tell you that on the flip
side, everybody said, yeah, true.

Right?

We beat the learning curve.

Now we understand how these work.

We know the words.

We know how the math goes.

And so there's really a benefit to that.

No question.

Treichel: That makes good sense.

That makes really good sense.

What, so what else?

So any, anything else?

Is there a question, Mike, that I should
have asked you that I have not yet

asked as it relates to anything you've
got going on in the credit union space?

Mike Bell: I don't think so,
but let me capture what I would

call the trends at the moment.

I think it's important.

I've mentioned it, but
I want to get people.

This is the only thing they
listen to these minutes.

Just so you understand what's happening.

Number 1.

On the whole bank side, there's more
activity than there ever has been.

Every small bank, meaning billion
dollar or less bank in our country,

I'm telling you is either for
sale or would sell if approached.

Certainly, there's exceptions
don't get me wrong slightly

facetious, but not really Mark.

It's amazing what's happening now.

Number 2 bank branch
transactions are exploding.

There are more opportunities
out there for that.

That's real.

People need to pay attention to that.

3, the ancillary business thing I
mentioned a lot of baby boomers retiring.

That's also real.

And then I want to add 1
thing we didn't talk about.

It's, it's something that I do.

It's just not really the
billboard flashy stuff.

But I want to tell people that in
the credit union to credit union

combination space, I am seeing
and noticing and I've talked to my

colleagues in this space and they
agree a trend Mark, we're more and more

what I would say larger credit unions.

Are considering mergers of equals,
I think that if you look close in

the last 2 years, you would see
maybe 1 2 a year announced and

that was like, well, that's crazy.

I think this year you've already
seen, or in the last should

be this year 3, announced.

And I'll tell you, we're involved
in 2, 3, 4 more that aren't going

to finish line yet and may not be.

But as I sit here, I can't ignore
the fact that that activity

level has really picked up.

Those are the 4 things
that are really apparent.

And are happening today that.

Next year that list might change, right?

This is all cyclical, but all 4 of
those things are real, and I think

should be on the mind of your listeners,
whether they're in those bands or not,

they already know what's happening.

Treichel: That's a great summary, and
I can confirm, from my conversations

that the merger of equal arena.

Is is cyclically hot right now.

I definitely wholeheartedly
agree with that.

So very good.

Mike, so if if a listener has heard
this and is listening in the, you know

what, I've never really thought about
wiring the things we've discussed

here today, banks, a spinoff, a title
company, and they wanted to reach you.

What's the best way for
them to get in touch?

Thanks,

Mike Bell: Mark.

Yeah, so I always tell people just
feel free to start with LinkedIn,

similar to you, Mark, similar
to the guys that old and laying

around a friend friends of ours.

I am very active on LinkedIn,
put out a lot of content.

Every time there's a deal announced,
you're going to see it rather instantly.

It's a really good way to connect with me.

And even if you don't want to
connect with me, you can actually

watch me in the background.

It's a safe way to do it.

And really get a feel for
what's happening in this space.

Right?

So it's very, very good.

And then my law firm is Honigman, H.

O.

N.

I.

G.

M.

A.

N.

And folks can find me on all my
information, all the news releases,

all the deal announcements on
our website in my bio and with

all my contact info, right?

Email cell phone desk phone.

But I would encourage you to jump on
a LinkedIn by the way, not just mine,

but yours to mark and I'm serious.

And the guys that all the land,
between the 3 of us, we kind of cover.

Most, if not all of the things that are
happening today, and it's pretty good.

I have a lot of people mentioned
that to me that they can get a

pretty good pulse on the industry
just by a few LinkedIn pages.

Treichel: That's good to hear.

Yeah.

I like, I love LinkedIn.

I'm on it daily and I like seeing what
you post there and I, and I will put

the contact information, a link to your
LinkedIn and your company's webpage

in the show notes for this episode.

So Mike, thank you so much.

I appreciate the update on
everything you've got going on.

It's exciting time for
acquisitions indeed.

And listeners, I want to
thank you for listening.

As always, I hope you'll
listen again soon.

This is Mark Treichel signing
off with Flying Colors.

Thank you for joining us on this episode
of with flying colors, subscribe on

your favorite podcast app to hear future
episodes where subject matter experts

of all varieties will provide tips
on how to achieve success with NCUA.

If you would like to learn more about
how we assist credit unions, check

out our services at marktreichel.

com.