Too Small to Survive and Too Big to Fail


I was recently asked in an interview if I thought Michigan Legacy Credit Union at $233 million is too small to survive. Will the credit union have to merge into a larger credit union? I have been hearing this since at least 2007. That you have to be $250 million to survive in the future. So let me ask you this: in the last 13 years with all the talk on needing to be at least $250 million to survive, why are there still $13 million dollar credit unions in the industry? Why haven’t they disappeared? I know of small asset size credit unions that are vital to the owners they serve and do a great job. Is it more challenging? Maybe or maybe not. But who gets to pick the number credit unions need to be at to survive?

Too small to survive vs too big to fail

I see it as my job to assist small credit unions in any way we can–to help them survive. Last year, we completed a Business Software Alliance (BSA) audit for a small credit union as the CEO felt they were overcharged by the last company, and had received a lackluster report. I am happy to say she signed on to a three-year agreement for our services. It is great for my leadership team to see and remember the struggle small asset size credit unions face, though we are by no means a “large” credit union. The joint venture is mutually beneficial for both of us. My team learns and the credit union we assist receives a BSA audit they are happy with that doesn’t break their budget.

On the other end of the spectrum, we have too-big-to-fail credit unions. After talking with many industry peers, it is always amazing to me that examiners focus on small and medium size credit unions without carrying the same standards to large asset size credit unions. They get glossed over because they have enough net income and assets to absorb any losses. They are simply, “too big to fail.”

A double standard

Yet as we look back on history, it is the largest players that have caused the biggest issues and regulatory concerns in the entire financial industry. Are large credit unions major offenders compared to mega banks? Of course not, but it is time to put an end to the double standard regulators continue to perpetuate. The same exam standards are not applied and we know because yes we talk and discuss exam issues with each other. It is always amazing to me the things that Michigan Legacy is required to provide that I never hear another credit union having to supply their examiners.

Small credit unions: try CUSOs before vendors!

A wise person once taught me to watch for vendors who just want our money. Then find the partners who are willing to listen more than they talk, help you, and work with you through thick and thin. You can do a lot more on your own without expensive software than you ever imagined.

As a rule, we now work with CUSOs we either currently own or would like to own before any other vendors. This has proven to be vital as the CUSOs we own return a patronage dividend to us. Their motives are driven by the fact that they will not be successful if their owners are not successful. Credit unions who also own or participate are more willing to work with each other for the good of all. There are very few vendors out there who have proven to be first in it to help us win before they are first and foremost willing to make a sale.

Too small to survive? Unlikely

Can a credit union of $233 or $12 million survive? Absolutely! Not only can they survive, but they can be vital to staff and owners now and in ten years. There are still 1,329 credit unions under $50 million in assets according to Statista data as of 2019. It’s unrealistic to think every single one of them will fail. Don’t throw in the towel because your credit union is smaller in size. Keep working to improve because yes, you can survive and thrive!

As a leader, I will always do what is right for my owners and staff, and I strongly encourage you to do the same. That is the unique identity of each credit union. Similar? Yes. Mirrors of each other? No. I hope to respect each credit union and listen for opportunities to help those smaller credit unions and forge our path forward. I am grateful to belong to a cooperative industry with leaders who are willing to share and who have helped us along the way, and I hope to always pay that forward for anyone who asks. Maintain your ideals and unique ideas, learn from others, and forge your way forward. Be true to your team and your owners and the rest will work itself out.


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