The Credit Union Wins

By joining forces both credit unions gain more resources. In turn this leads to:  More for members; More for staff; and More for the community.

Economies of scale are very clear within the credit union industry.  When analyzing credit unions by asset size it is very apparent that larger credit unions have significant financial advantages:

• Lower operating expense ratio
• Higher dividend payout
• Higher membership growth rate
• Higher loan ratios
• Higher average salaries

Oftentimes one of the biggest gains in a merger is the additional resources available.  Small and medium sized credit unions often are constrained in resources available to address compliance issues, introduce new products, conduct in-depth research/analysis, deploy advanced technologies, and expand branch network.   Through a merger the costs of reinvestment are spread across a much larger membership base enabling both credit unions to enhance their competitive position.

As competition has heated up, attaining critical mass in a market has become imperative competitive strategy.  Joining together credit unions can immediately increase market penetration provide a more robust branch system and have a louder voice in the media.

Mergers allow credit unions to reach expand their geographic footprint.   A partnership through merger is an effective way to provide services to members outside of the credit unions core area by utilizing each others branch network.  Some credit unions also look as a merger as a means to diversify their geographic risk.  Many credit unions with operations in markets severe mortgage losses were able to sustain good performance due to geographic diversity.  Other geographically diverse mergers have benefited the differences in economic cycles – enabling a low loan/share credit union to be a provider of deposits to a high loan/share credit union thus enabling both credit unions with more favorable rates to depositors and borrowers.