By Doug Wadsworth
The Endangered Small Credit Union Defense (ESCUD) is all about advancing regulatory relief priorities for small CUs, and encouraging small CUs to live their cooperative mission by giving back to members and communities. Sometimes to do that, we highlight existential challenges facing us.
Well, I keep seeing the number of small CUs decline via mergers (in The CU Daily news). These always get my attention, because…I am one those small ones.
ESCUD conducted a couple small CU surveys over past months, and the results ranked “regulatory burden” as the second-largest obstacle to financial health and growth, right behind competitive pressure. Nearly 75% of responding CEOs were not very confident their small CU would still be thriving (or even exist) 10 years from now. That’s a problem. If you don’t think so, consider the optics after the small ones are gone, because the public considers large CUs as largely indistinguishable from banks.
I’m not saying they should, but they do.
Few in Distress
According to my research, the NCUA approved 162 credit union mergers in 2024 and 157 in 2025. However, apparently only a small percentage involved financial distress, instead most were more strategic in nature (the small CU was healthy).
So, I asked AI to summarize the reasons cited when small CUs merge into larger ones. The prompt was: What are the justifications being used? Below is what Grok AI came up with:
- Expanded services, products, and technology upgrades, This was by far the leading rationale. In Q3 2025, 71% of mergers (29 of 41) explicitly cited the need for expanded services as the primary reason. Small credit unions often state they cannot independently afford modern digital banking platforms, mobile apps, advanced lending tools, or broader product offerings that members now expect.
- Reducing operating costs and achieving economies of scale. Mergers are frequently framed as a way to lower costs, spread fixed expenses, and gain pricing power in a competitive marketplace.
- Leadership succession and staffing challenges. Difficulty replacing retiring CEOs, maintaining active volunteer boards, or retaining qualified employees are recurring themes, Some filings note the “inability to obtain officials” as a direct factor.
- Membership growth difficulties, This challenge has become more visibly cited in recent years. NCUA data for 2025 shows that while overall credit union membership grew modestly in aggregate (reaching roughly 144–145 million), the median credit union experienced a 0.5% membership decline. Approximately 55% of federally insured credit unions had fewer members year-over-year, with declines disproportionately concentrated among small institutions — over half of those with falling membership were under $50 million in assets.
According to my AI analysis summary, merger announcements and industry commentary increasingly reference the need to “grow our membership base,” “expand membership,” or better serve members through enhanced capabilities that small standalone institutions struggle to deliver. Regulatory burden is also noted in broader industry discussions as a contributing factor accelerating consolidation, with leaders calling for relief to help smaller institutions remain independent.
The Gap Widens
So, there you go. As the gap continues to widen between large and small, it is pushing many toward those strategic partnerships, to help ensure long-term viability. How do we feel about this trajectory?
I’ll focus on things I can do, like amplifying small CUs voices to advance our regulatory relief priorities, and encouraging small CUs to “give back” radically to their members – in the spirit of our cooperative movement – (helping those who need us most).
One thing I do know: If we don’t combine our small CU voices and ask for regulatory relief, we won’t receive any, and that is a huge factor for our continued survival.
Note: The assessment of ‘reasons cited for mergers” was assembled by Grok AI (built by xAI) using publicly available information from CU Today, Credit Union Times, CEO Advisory Group merger analyses, NCUA quarterly data reports (2025), and other industry sources discussing 2024–early 2026 merger activity and rationales. It does not draw from internal ESCUD surveys or private letters.
Doug Wadsworth, President/CEO of Tri-Cities Community Federal Credit Union and President of ESCUD, welcomes dialogue on these issues and can be reached at [email protected] or via www.endangeredsmallCUdefense.org.
One Response
This is really good information. I find it interesting, and in fact contradictory, that although regulatory relief is decribed a “huge” factor for small credit union survival, regulatory burden or any reference to that theme is not among the many reasons for merger that were listed. Hardly a compelling case for preferential treatment from regulators. The bank lobby’s second bullet point after the CU’s pay no tax issue is that we are not regulated the same or as heavily as banks. Seems to me we shouldn’t add fuel to the fire by strongly advocating that a large segment of the industry (by number) somehow deserves more relaxed regulatory treatment. We constantly hear the “even playing field” whine from the banks, which is a credible view on the regulatory front, but we want to make it even more uneven?