Mergers: a Credit Union Marketplace Trend

Mergers: a Credit Union Marketplace Trend


Mergers have always been part of the financial industry, but the reasons for mergers may not all be bad. Can a merger bring value to the membership? The answer should theoretically always be yes, but in practice it may not be.

Historically, credit unions that experienced a merger into another credit union typically had negative reasons for doing so: regulatory requirement, retirement of the CEO, inability to compete with their products and services, or the field of membership company went out of business.

But today, mergers can be beneficial for both credit unions involved. They can provide a wider variety of products and services to handle increasing consumer demands, and deliver lower loan rates, higher dividends, and lower or no fees.

In a recent report from the Filene Research Institute, they found that mergers can have a place in the credit union’s business plan, particularly for smaller credit unions merging in with a larger credit union. They provide economies of scale (per employee, per asset, or per income, etc.), and have “more credit union” under a highly efficient and experienced management team.

However, Filene also acknowledged that a merger may not be a good option: “There are many reasons why credit unions—both larger and smaller institutions—may not benefit from a merger. One of the most important determinants of merger success is the level of cultural due diligence the different parties undertake in advance of the merger.”

Size does matter

There are also significant differences in the merger process based on the size of the credit unions. From 2010 – 2017, there were 1,840 unassisted mergers (no regulatory intervention), with around 1,700 of these with “small” credit unions involved. Of course, there can be all mixtures of sizes that may develop a business plan together.

While it may make sense for a smaller credit union to merge into a larger one to provide greater access to services for its members, many of the complaints today regarding an overactive merger community stem from equally-sized and successful credit unions merging seemingly purely for scale.

The question a credit union needs to ask itself should always be, “is this really in the best interest of our members, or is the merger serving some other purpose?”

Recommendations for a successful merger

A credit union considering a merger, whether inbound or outbound, and in the interest of its members, should incorporate a strategy into its business plan. If that’s the route you’ve chosen, consider being proactive and not waiting for a merger opportunity to present itself. Find one that will be best suited to your own credit union strategy. Communication is key when following your merger plan. Don’t have a plan? Develop one first.

Avoid being emotional in making decisions. Each management team and board of directors may have a long history with their credit union. While experience and intuition are important parts of the decision-making process, they may lead you blindly down the wrong path. First establish criteria with measurable objectives to keep you on track.

Data processing – how do they stack up?

Data processing for your core system and other vendor interfaces can sometimes lead to cost-saving decisions that may not be the best long-term solution. Investigate each data processors’ support for mergers. Do they have a proposed handbook? Do they provide lower cost for the merging credit union or an introductory period for the data processing expenses? Do they have experienced staff who know how to handle the data? Can they provide ideas for marketing the merger? These services can be invaluable – especially if they are provided at no cost.

Mergers can provide an environment for growth and provide a marketplace perspective that will meet the ever-changing members/owners needs in the financial world of technology enhancements, changing regulatory requirements and economic standards. Credit unions should consider mergers as a business tactic, rather than simply providing a helpful hand.


  • Barb Cooper

    As Programming Services Manager, Barb engages with programming teams to improve project workflow, provide training, manage the marketing side of programming, and coordinate team relations with those outside the programming department. Barb also provides programming research for client serving staff, improves programming department documentation, is involved in the efforts to improve the CU*BASE database, and attends focus groups and client sessions to represent the programming department. Throw in a little programming as well.

  • chip Filson#1

    November 4, 2019

    Besides the issues raised, one should also ask what the value of a CU charter is today. That is to replace the years of effort and service, how hard would it be to start that charter today? When one looks at the de novo efforts, and the regulator imposed capital requirements, the cost of a new charter can be as high as $2-3 million not counting years of sweat equity.

    See the story of the Maine Harvest FCU as an example. It will open for business, lending, in 2020, but did the first member survey in 2012. Closing down a charter is like thrown millions of dollars away.

    New Credit Union Charter Germinates After Eight Years

  • Barb Cooper#2

    November 6, 2019

    Appreciate your comment to this article.

    The value of the CU charter is a great point to add when a credit union is evaluating an outbound merger. The cost of the financial and sweat equity in getting their original charter and providing credit union services and products since should be considered. Combining the merged credit unions might not be “throwing millions of dollars away,” but capitalizing on an improved structure to continue to meet the members financial needs.

    Maine Harvest FCU is a great example of the efforts getting to an approved charter and I’m looking forward to following their efforts after their launch in January 2020. They have a great website already explaining their place in a specific marketplace.


Your email address will not be published. Required fields are marked *