In Prioritizing Succession Planning, Credit Unions May Also Wish to Consider Mergers

Succession planning has been a hot topic in the credit union space over the last several years, fueled in part by the National Credit Union Association’s rule that requires federal credit unions to establish a formalized succession planning process for filling key management and board positions.

Creating an even greater sense of urgency for succession planning, a tight post-pandemic job market has heightened the competition for top talent, making it vital for credit unions to be proactive in recruiting and retaining the best possible candidates for future leadership positions.

CEO Advisory Group’s latest white paper addresses the subject of succession planning in the credit union space. Entitled “Succession Planning with an Eye Toward Mergers as an Option,” the white paper highlights the importance of finding and developing future leaders who have the capacity for building a thriving credit union amid an ever-increasing competitive landscape and increasing complexity of operations.

Why Mergers as an Option

The difficulty in finding qualified successors was the impetus for devoting a section of the white paper to mergers as an option for credit unions, especially smaller ones, that find themselves unable to compete for CEO and other C-suite talent.

An accelerated pace of executive retirements is forcing the issue. Credit unions that have held onto their CEOs for 20, 30, or even 40 years are likely to experience sticker shock as they try to vie for leadership in a market where the median total compensation for credit union CEOs is approaching half a million dollars.

“There’s been a massive bubble of the Greatest Generation and boomers aging as CEOs of organizations over the last 10 years,” says Mark Weber, CEO/chairman of Strum Agency, a Seattle-based financial branding and marketing agency working extensively with credit unions. As one of seven experts who contributed comments to the white paper, Weber observes. “We’ve seen some organizations with as many as two-thirds of their senior leadership team readying for retirement. That presents a huge succession challenge and has been a trigger for some organizations to consider looking at mergers as market-rate compensation has grown.”

“The impending retirement of a credit union’s CEO is frequently the impetus behind merger discussions for smaller credit unions, and for all the obvious reasons—the most obvious being that top financial services industry talent is very expensive and financially out of reach for many small institutions,” concurs Teresa Freeborn, a former credit union CEO and current consultant, speaker, and author who also contributed her expertise to the white paper. “A merger is often the perfect solution when a retirement is in the offing.”

Keeping an Open Mind

Mergers can figure into the succession planning discussions for all sizes of credit unions, both small and large. Smaller credit unions may want to time a merger discussion for when their CEO is nearing retirement age. When their CEO departs, they will already be factoring a period of transition and cultural change, so it’s a good time to consider a merger option and whether it might be best for members, employees, and the community.

Larger credit unions, meanwhile, may discover that mergers are a way to bring more talent into their organization as a pipeline for future leadership roles. Mergers also are beneficial in helping credit unions build scale, expand into new geographic markets, offer a greatest scope of products and services, and gain additional resources that otherwise might take years to develop through organic growth.

Brian Waldron, president/CEO at $2.4 billion Dort Financial Credit Union in Grand Blanc, Michigan, stresses that it’s important to keep an open mind about mergers. Though Dort Financial has achieved most of its growth organically, the credit union’s acquisition of Flagler Bank in southeastern Florida in 2024 added over $500 million in assets. Achieving this growth allows Dort Financial to more effectively serve its members.

“I believe there’s always a place for M&A in your growth strategy,” Waldron shares in the white paper. “You should always be prepared for a merger, even if you’re not necessarily out there seeking one.”

Having been on both sides of the merger equation during her four-decade career in the international credit union movement, Freeborn contends that the competitive realities of today’s financial services market make merging the only responsible choice for many credit unions.  “We have an obligation to members, which requires us to not simply keep the credit union functioning but to ensure it can continue to be a positive difference-maker in our members’ lives,” she observes.

Download our white paper: “Succession Planning with Mergers as an Option”