Credit Union Mergers: Board Member Fiduciary Duties & Strategic Planning

Fiduciary Duties and Responsibilities

It is the toughest decision a credit union now confronts, and one suddenly faced by most credit union board members.

The issue today is mergers.

Nearly every credit union now considers mergers, either as an acquirer, an acquiree, or in a merger of equals.

This is an entirely new reality.

In 2000, there were around 10,600 credit unions. By 2008, there were 8,100—a 24% decline.

In 2008, there were 336 credit union mergers.

In 2024, there were 162 mergers—but at that point, only 4,555 federally insured credit unions remained.

Today, very few credit unions can honestly declare no interest in mergers.

Why? Merger motivations today differ significantly from those of the past. Twenty-five years ago, nearly all mergers involved an ailing credit union causing regulators concern. A larger credit union would absorb it, eliminating risk for the regulator and the insurance fund, thus benefiting the credit union movement as a whole.

These mergers occurred before an ailing credit union needed conservation, quietly resolving the issue. A failed credit union is perceived as a stain on all credit unions. Far better to merge it out of existence than to see it conserved.

While industry insiders bemoan the shrinking number of credit unions, they also recognize the positive results from these activities, namely increased total assets and the growth of membership. Most conserved and merged credit unions were small, often below $100 million in assets.

Today, mergers extend beyond rescuing troubled institutions. Healthy institutions merge strategically to better compete with massive banks and emerging fintech companies. The prevailing belief is that scale matters.

Examples:

• In September 2024, First Tech and Digital Federal Credit Union announced a merger, forming a $27 billion institution ranked sixth nationally.

• In April 2025, Wings Credit Union and ENT Credit Union announced a merger, creating a $20 billion institution ranked among the top ten.

• Also in April, San Diego County Credit Union ($9.1 billion) and California Coast Credit Union ($3.3 billion) combined to create an institution exceeding $12 billion in assets.

Thus, mergers are now often strategic decisions by healthy institutions seeking to improve further.

Consequently, every credit union board member must gain real expertise in merger matters. Ignoring mergers is unwise given the role they play in the credit union landscape. In addition, discussions can begin without full board awareness.

Understanding the new merger landscape and partnering with the CEO on a merger strategy is now a key fiduciary duty.

The Board’s Primary Duty in a Merger

“A board member must act in the best interests of the membership,” stated Paul Dionne, Chief Strategy Officer of Quantum Governance. “Decisions must benefit members—not the CEO, board members, or anyone else.”

Exactly what is in “the best interest” of members? How can a board member project the specific benefits that will result from a merger? Determining the answers to these questions is complex but crucial.  

What's Not in Members’ Best Interest

Many mergers include payments to departing CEOs, and sometimes also to departing board members. Such payments require NCUA disclosure, along with other information to be provided according to the NCUA’s Merger Package Checklist.

Frank Diekmann, a prominent credit union journalist, noted,” We see mergers really driven an awful lot by insiders cashing out.  It used to just be members of management but now you see members of boards cashing out.  That money belongs to members; they just aren’t aware of it.”

Diekmann added that although the NCUA requires that a disclosure be filed, few members know of this requirement. Even fewer read these disclosures.

Are these payoffs illegal, especially given the prohibition at federally chartered credit unions against director pay?  Diekmann acknowledges the high possibility that payoffs are legal.  But often they smell wrong and often, too, they simply are not in the best interests of the members.

The moral for board members: the members’ interests are paramount. If you have grounds to suspect a board member or an executive of seeking to self-deal, report it to the board president and/or the CEO.   If concerns remain unresolved, the next step is to report concerns directly to the NCUA.  

How Many Mergers Fail to Consummate

No one knows how many mergers stall in the discussion stage. Lawyer Michael Bell, who has deep experience in credit union–bank deals, estimates that of the bank acquisition talks that reach a serious level of discussion, only 10% consummate.  Experts who focus on credit union– credit union mergers offer similar guesses.  

What is known is that few of these mergers are voted down by members. In 2023, NCUA noted that in the prior three years, less than 1% of mergers had been rejected by members.  

In the rare case that a credit union’s membership does reject a merger, experts point to a lack of effective communication around the benefits of the proposed union. In those instances, boards and c-suites should look to their messaging around potential benefits to understand what went wrong.

Even so, many mergers fall apart in the discussion stage, long before the issue reaches the members. Sometimes this is because the financial figures don’t add up, but more often, experts say, it’s due to personality clashes and egos. A common scenario occurs when a board member realizes that they will likely lose their seat in the merged entity. Suddenly aware of potentially losing perks—ranging from trips to Hawaii to health insurance—a board member solidifies a "no" vote.

Is this decision in the best interests of the members? It isn’t, but it happens frequently.

Senior executives often experience similar conflicts. Realizing there will be no role for them in the reorganized institution—after all, the merged entity does not need two CFOs or two VPs of HR—these executives might fear limited job prospects elsewhere. Thus, they document multiple reasons against the merger.

The Analytical Toolkits

It may seem simple: a board member’s duty is to vote "yes" on mergers that serve the members’ best interests. How difficult can that be?

In reality, this responsibility is challenging, particularly given the large membership size of many credit unions—some with over 100,000, even millions of members—and the increasingly diverse demographics.

Consider further: A merger is proposed, but is this particular credit union the best merger partner? With more than 4,000 other potential partners available, is this truly the optimal choice?

Immediately accepting the first merger offer may actually breach fiduciary duties. Often, board members cannot be certain if a particular offer is truly the best available.

Historically, credit unions lacked methods to evaluate alternative merger partners thoroughly. This gap inspired CUCollaborate to create its Merger Network, where credit unions can anonymously signal merger interests and explore suitable candidates.

Keep in mind that hundreds, even thousands of credit unions are interested in merging. Many may never proceed, but for those actively seeking mergers, the Merger Network can identify the most optimal matches. Kevin McBreen, Merger Advisory Head at CUCollaborate, explains, “Our merger network facilitates more conversations and adds structure and data to the diligence and selection process.”

CUCollaborate’s Merger Network leverages proprietary data to evaluate how effectively a Continuing Credit Union would serve a potential Merging In Credit Union’s members across key financial and operational factors. Institutions– which are allowed to remain anonymous until they choose to identify themselves–can anonymously search this data vault and reach out when suitable matches appear.

The network also features a member benefit analysis calculator, helping board members determine whether a merger genuinely serves the members’ best interests. McBreen states, “This model specifically analyzes merger impacts on members, comparing pricing policies, loan and deposit terms, and credit score ranges to confirm benefits to a credit union’s specific membership.”

In addition, CUCollaborate is building out other sophisticated analytical tools to further examine potential outcomes and implications of mergers, such as how many members might leave post-merger, how account behaviors might change, branch closures, and organizational chart integration. Historically, credit unions have lacked easy access to such detailed analysis.

Luis Dopico, CUCollaborate’s Chief Economist, emphasizes that boards must approach mergers analytically rather than basing decisions on personal preferences. "We think boards need a more data-driven approach rather than just considering personal chemistry or casual meetings," Dopico explained.

Above all, recognize that the first merger offer is not necessarily the best. “We want to create a structured process with the Merger Network where people can consider multiple options,” said McBreen.

Additionally, the NCUA provides a Field of Membership Compatibility Matrix, which ensures merging credit unions’ charters are compatible. Remember, incompatible fields of membership can exclude certain mergers entirely.

Using such analytical tools and data, board members can confidently fulfill their fiduciary responsibilities, replacing guesswork with data-driven decisions.

Credit Union–Bank Mergers

Credit union–bank mergers are excluded from this article for several reasons. Primarily, these are straightforward acquisitions, not mergers. Additionally, they remain relatively rare—only 24 announced deals occurred in 2024.

Secondly, few credit union executives and board members show significant interest in bank acquisitions. These are cash-based transactions, and most credit unions lack the necessary liquidity.

Is Every Merger Necessary?

Regulator-directed mergers currently account for approximately 15% of all mergers. This article addresses purely voluntary mergers.

Are all voluntary mergers necessary?

A common justification for mergers is improving technology infrastructure. However, this argument often lacks validity. Sam Brownell, CEO of CUCollaborate, notes that members desiring enhanced technology typically access it through other financial institutions. The era of exclusive banking relationships has ended; most consumers use multiple financial service providers.

Moreover, smaller credit unions frequently use tech vendors and CUSOs effectively, delivering competitive tech solutions. Even credit unions under $200 million in assets can offer robust tech services, disproving assumptions that small institutions necessarily lag behind.

"Our CEO Is Retiring"

Another common reason for mergers is CEO retirement without a qualified successor. Acknowledging this, the NCUA will require succession plans starting in 2026 for key executives, including CEOs and board members.

Then NCUA Chair Todd Harper championed this requirement, aiming to reduce unnecessary mergers driven by poor succession planning. Effective succession planning could notably decrease mergers, as an NCUA study attributed 32% of mergers to inadequate succession planning.

While some credit union executives have complained about this requirement, a CEO succession plan is commonplace in publicly held companies and successor development often is a key task of the CEO. This is typical, proactive planning for any organization interested in longevity.  

Specifically noted in the NCUA guidelines for succession planning is the “board has to be involved,” said Jeff Paille, partner in The Bonadio Group’s Assurance Division, who has worked with credit unions in developing succession plans.

Paille added: “in some credit unions the board will take the lead on this.”

Despite frequent claims that many mergers are due to unsuccessful CEO searches, retired SECU CEO Jim Blaine argues that adequate searches rarely occur.

Do Mergers Work?

In conclusion, consider a fundamental question: do credit union mergers actually achieve the promised benefits?

Many mergers do deliver on their promises, but journalist Frank Diekmann notes numerous mergers fail to produce anticipated efficiencies. Often, mergers occur for reasons unrelated to genuine member benefits.

Ultimately, only mergers demonstrably in the members’ best interests warrant support.

The Next Step

Luis Dopico, Chief Economist at CuCollaborate and a mergers expert who has authored many technical papers about credit union mergers (including “Characteristics of Credit Union Mergers: 1984-2008,” a Filene report), cited the importance of a merger policy. Dopico indicates that the policy should be unique to each institution–there is no “right” policy for all.  

A credit union that serves only police officers might decide that it only wants to merge with another credit union with the same focus. Or it might decide to broaden the field to include credit unions that serve all emergency responders.  Or maybe it’s geography that matters the most. Some credit unions pride themselves on serving members with subprime credit profiles. Should they only consider merger partners that do likewise? It’s a topic to define in the policy. The board has a wide open field of potential merger partners and the point of this policy is to narrow the list.

While the CEO typically takes the lead in identifying potential merger partners, the board plays an active role in determining which credit unions to pursue for deeper consideration.

Ask the Members

If a board is undecided or divided on the question of considering a merger, Dopico suggests another option, “Collect input from members with a survey that explores many issues in addition to the merger question. Ask about satisfaction with branch hours, the mobile banking app, branch locations and a range of issues that members generally have opinions on. Then also include a few questions about merger possibilities.”

While there is no legal requirement to survey members at this stage of the process, when a board has doubts about what is in the best interests of the membership, the members themselves are the logical place to seek information.

“More Communication”

“What we are trying to foster is more communication among credit unions that are interested in exploring merger possibilities,” said McBreen.

That is what is exciting about mergers in 2025. Conversations that occurred behind closed doors now can occur online. And they can be richly supported by pertinent data.

To recap, here are a board member’s to-do’s”

1. Work with your board and CEO / Executive team to have a coherent merger strategy.

2. Define what "good" looks like for M&A involving your credit union.

3. Make sure the credit union’s executives and board members understand the landscape and have realistic expectations for what M&A can do for your CU.

4. If entering M&A, make the process competitive and data driven.

5 Above all, know how this merger is in the best interests of your members and quantify the benefits to them.