By Jim Drake
One of the most common questions I hear from leaders of large credit unions is this: “What can we do to support smaller credit unions?”
It’s a fair question—and an important one.
But if we’re being honest, the answers often don’t go very far. And from the small credit union side, we haven’t always done a great job of articulating clear, actionable expectations either. We’re good at identifying the issues. Less effective at defining clear solutions.
So, let’s change that.
The Reality
I run a small credit union in a market with multiple billion-dollar institutions. Strong organizations. Well-run. Highly competitive.
But here’s the reality: Not one of those organizations has walked through our doors to introduce themselves since entering the market or during leadership transitions.
That’s not a complaint—it’s an observation. And it leads to a larger question: Are we still operating as a cooperative movement—or just competing financial institutions that happen to share a charter type?
Moving From Frustration to Action
After sharing these thoughts with peers today, one point was clear: The conversation becomes productive when we move from frustration to specific, implementable ideas.
Here are a few that reflect both my perspective and real feedback from other credit union leaders.
What Real Support Could Look Like
1. Start With Presence and Relationships
Get to know the smaller credit unions in your market.
- Meet with leadership
- Understand their balance sheet pressures and opportunities
- Build the relationship before competition defines it
This is simple—but it’s not happening consistently.
2. Invest in Cooperative Leadership Development
If we want cooperative outcomes, we need cooperative-minded leaders.
- Send executives to CUDE (Credit Union Development Educator) training
- Reinforce cooperative philosophy alongside financial strategy
- Build leaders who understand why we exist—not just how to grow
Because if we only train for scale, we shouldn’t be surprised when we act like scaled competitors.
3. Recommit to Cooperative Principle #6: Cooperation Among Cooperatives
This principle should show up in business decisions—not just conference presentations.
If your growth strategy impacts smaller credit unions, there should be a deliberate cooperative offset.
4. Rethink How We Compete on Loans
This is where today’s feedback added important nuance. Yes—large credit unions have structural advantages in pricing, access, and distribution.
But several peers made a valid point:
- Small credit unions can often compete on rate
- The challenge is less about pricing—and more about scale, channels, and access
So, what are constructive options?
Option A: Expand Loan Participations
- Offer participations to smaller CUs at low or reduced premiums (or at cost where feasible)
- Create consistent access to earning assets
- Help smooth loan-to-asset imbalances
This isn’t theoretical—there are already examples of large credit unions beginning to do this more intentionally.
Option B: Adjust Competitive Practices
A simple but powerful idea raised today: Adopt a policy of not actively refinancing loans away from smaller credit unions in your market
That is one of the most direct ways to operationalize “cooperation among cooperatives”—without requiring subsidy or structural change.
Because let’s be candid—when we aggressively refinance each other’s loans, we’re not functioning as a movement.
5. If You Take the Deposits, Support Liquidity
Deposit competition is real—and smaller institutions feel it faster.
A cooperative response could include:
- Offering low-cost lines of credit
- Acting as a local liquidity partner
- Supporting stability—not just growth
This isn’t charity. It’s about maintaining a healthy ecosystem.
Encouraging Signs
One of the most important takeaways from today’s conversation: This is starting to happen.
There are large credit unions beginning to:
- Share participations more intentionally
- Recognize the imbalance created by scale
- Look for ways to collaborate rather than just compete
That shift matters.
But today, it’s still the exception—not the norm.
When Did Strategy Become Only About Profitability?
At some point, our industry shifted from Mission + Sustainability to Growth + Profitability as the primary outcome
Profitability matters. Scale matters. But if that is the only lens, we lose something fundamental.
Because credit unions were not created to optimize earnings.
They were created to serve people—especially in communities that others overlook.
The Real Risk: Losing the “Why”
If we continue down a purely competitive path:
- Smaller credit unions disappear
- Local communities lose access and voice
- Consolidation accelerates
- The cooperative identity erodes
And eventually, we are forced to ask: What makes us different anymore?
A Call to Action
This is not about blame. It’s about leadership.
If we believe in the credit union movement:
- Show up locally—get to know smaller institutions
- Invest in cooperative leadership (not just operational scale)
- Turn Principle #6 into real business practices
- Compete responsibly—without undermining the system that supports us all
Final Thought
The credit union system was never meant to be a collection of isolated competitors. It was built as a network of cooperatives.
The question isn’t whether large credit unions can help. The question is: Are we willing to operate like a movement again?
I’d genuinely like to hear from other CEOs—large and small:
What does real cooperation look like in your market today?
Jim Drake, CUDE, is president/CEO Blue Mountain Credit Union in College Place, Wash. Mr. Drake can be reached at [email protected].
13 Responses
Thank you for these actionable ideas, and for speaking up for the survival of our small credit unions (and thus, our entire movement, big or small). -Doug Wadsworth, ESCUD & Tri-CU
Really like the call out on “When Did Strategy Become Only About Profitability?” I think it’s so weird when CU’s want to brag about their ROA like they’re impressing their shareholders
Who declared strategy is all about profitability? Point to a credit union that brags about their ROA. The small credit union movement will never get anywhere until they stop assuming big is bad. Or that growth is bad and achieved by means other than living the CU principles. Or that large credit unions are focused on profit? You need only look at small credit union capital ratios – they make plenty of profit but then withhold it from their members.
Some small CUs ‘withhold profit’ and build strong capital ratios due to their size and the threat of ONE internal fraud case (especially in loans) can take down the CU especially if they are under $50 million. Stop bashing on small CUs for ‘hoarding capital’ when often times it’s about protecting their institution for the long term.
So withhold value from members on the off chance there is an internal fraud incident, which is preventable with good processes and controls, and by following the “over burdensome” regulations that will also prevent it? Meanwhile, let others serve your members because their better loans and deposit rates are basically trapped on the balance sheet. Interesting strategy.
Unless you’ve actually run a small CU can’t expect you to understand the delicate balance with everything every day. Keep bashing on small CUs with your generalities and painting us as ‘whiny’. It’s adding fuel and uncovering more of the ugly side of our industry which is helpful for all of us to see. Meanwhile, Jim has put forth some ideas to help bridge the gap. You seem to be interested in widening the divide. No thanks.
Fair enough, but precisely the point the other way. Large cu’s are blamed, stereotyped with the generalities that they are only profit and growth focused and don’t understand or live by the coop principles. You’re getting a reaction from the blame going on from small cu’s. Broader point anyway is what is happening in the industry and the market. Villify large credit unions all you want, but they apparently understand the resources of the current and future market, and they are adapting to see the best interests of members. Sorry if that impacts your cu or hurts your feelings, but the sooner we stop talking a being a movement and wishing things were like they were 90 years ago when CU’s were formed, the better off we’ll be. Check in with using 5 years and tell us how you’re doing.
The recent anti-large credit union rhetoric is divisive and unproductive and unfortunately has been about victimhood and blame. It’s refreshing to see some tangible ideas put forward, not just complaints.
I remember when I was a kid and we moved to a new neighborhood and the neighbors brought us cookies and pie to welcome us to
the neighborhood? What’s in the way of small credit union leaders proactively reaching out to when a CU cones into their market? Set expectations. Tell them how they can and should collobirate. Lead! Don’t act like the girl that didn’t get asked to prom. That’s victimhood.
#2 has a faulty premise and certainly seems to imply if you are large you can’t be purpose driven and you don’t understand coop principles. I don’t know what training for scale is. Is there a scale class they all attend?
For most large CU’s growth is an outcome not a strategy. I don’t what a cooperative offset is. Dividend checks to small credit unions? Sure, large CU’s hold all the assets, but they also fund our advocacy and associations, invest in and create CUSO’s, have “enormous” community impact spend, and spend to market the CU model, philosophy and principles – which helps all credit unions. What else would you like?
So the answer on car loans is to advocate for uncompetitive trade practices? Is that even legal? So a member is eligible at both a large and small credit union. The large CU can save the member 75 a month on their car payment, but you want them ignore that, commit financial malpractice with their member, so a small CU can keep the earning asset, and in effect the pays the direct cost of the market subsidy for the small CU?
I appreciate the dialogue this article has generated because I believe it gets to the heart of a question our industry needs to wrestle with:
What truly makes a credit union different?
Some have correctly pointed out that large credit unions do tremendous good in their communities. I agree. Many invest millions of dollars in financial education, charitable giving, affordable housing initiatives, and community development.
But we should also recognize that community investment alone is not what distinguishes credit unions from every other financial institution.
Banks sponsor Little League teams. Banks donate to local charities. Banks support community organizations. In fact, banks are subject to Community Reinvestment Act expectations and are expected to invest in and support the communities they serve.
Doing good in the community is important, but it is not unique to credit unions.
What is unique is that credit unions were founded as cooperatives.
The credit union movement was built on the idea that people would come together to solve financial challenges collectively. Embedded in that philosophy is Cooperative Principle #6 – Cooperation Among Cooperatives. Credit unions are not simply expected to serve members; they are also expected to strengthen the cooperative system itself. [thecudaily.com]
That responsibility belongs to both large and small credit unions.
A large credit union that refuses to collaborate with fellow credit unions is not fully embracing the cooperative model.
Likewise, a small credit union that isolates itself, refuses partnerships, or rejects opportunities to work collectively is also not fulfilling that responsibility.
This is not a “large versus small” issue.
It is a question of whether we still believe we are part of a movement.
Historically, credit unions were created to serve people of modest means who were overlooked by traditional financial institutions. Many larger credit unions today have grown to the point where they can no longer effectively focus on the smallest, highest-risk, or least-profitable segments in the ways that early credit unions were designed to do. That isn’t necessarily a criticism—it’s often the reality of scale, complexity, and regulatory expectations.
But if large credit unions can no longer fulfill the original role on their own, then one of the strongest ways they can advance the mission is by helping preserve and strengthen the smaller credit unions that still can.
Supporting small credit unions isn’t charity.
It’s movement-building.
It’s recognizing that a healthy cooperative ecosystem includes institutions of different sizes serving different communities and needs.
My concern is that we increasingly celebrate growth, size, market share, and profitability while spending very little time measuring how effectively we are living out Principle #6.
Perhaps a better question for all of us—large and small alike—is:
What have we done this year to strengthen another credit union?
Because if we cannot answer that question, we may need to ask whether we are functioning as a cooperative movement or simply as competitors that happen to share a charter.
The cooperative model is about our entity types and being member-owned. The mandate is about how each cooperative serves its member owners. We get a tax exemption because of who we serve. There is, or shouldn’t be, any expectation or responsibility to cooperate with other credit unions. That’s not been legislated, nor did credit union founding fathers sit around and make a pledge to do that. The whole premise there there is a some sort of responsibility to serve each other is misguided, abd it it ever did matter, it’s archaic thinking. We compete with each other, just like banks do with other banks. That’s a reality whether we like it or not, and like any industry that competes with commodity products, only the strong will survive. There is a reason we don’t have 10,000 credit unions anymore. It’s a flashing red signal of an industry in decline and unfortunately a symptom of cu leaders that are stuck in the past, not focused on the future. That’s the reason we’ll have 2,000 CU’s in 5 years and why 75% of those under 100 million will disappear.
I disagree 100%. Most of us are in this industry because of the “people-helping-people” philosophy. I refer people to other credit unions all of the time for a service I may not be able to offer. It’s been great for loan participations, questions, collaboration, emergency disaster recovery assistance offers within our policy, if I see someone else is offering a car promotion, I may delay mine and switch it to a home equity promo. I think it’s not only a credit union philosophy but a life philosophy. If my neighbor was having a party and needed extra parking, I would use my garage to free up spaces. I have a feeling you wouldn’t. Not everything is a competition, and kindness goes a long way. I would feel comfortable calling up any credit union and telling them I am in a dire need of a cash counter because ours both broke at the same time. I know I would get one on loan. And I am not sure that the founding “fathers” and mothers would agree with you- they made this a mission, an industry, because of a need they saw and solved. Of course they wanted all credit unions to succeed. The strong minded will survive. I do what it takes to get things done and rub my nickel’s together when I have to. Does it mean it will work? Maybe not, but I will seek the advice of those before me and peers, and I know I’ll do all I can to help any credit union that I can. I hope that you attend a ServiceStar training or a motivational conference to get you back into a credit union frame of mind.