By Doug Wadsworth
I had an interesting discussion with the CEO of a large credit union recently about whether small credit unions were valuable. Obviously, all credit unions are different, and we should celebrate big and small because they provide special value in different ways.
At the same time, some things we can’t know unless we “live” it. My first three years were at a small credit union, followed by about two years at a large credit union, and finally back as the CEO of a small one (for the past 19 years). I have experienced both worlds, to some extent.
Blind Spots
After my chat with this large CU CEO, I jotted down a list of his/her beliefs about small CUs based on how I understood them. To be fair though, if I was in that big CEO’s shoes, I might think the same way. It should be noted there is little research to rely on, because these aren’t “quantitative” measurements, so it’s hard to avoid anecdotal evidence because that’s all anyone has.
#1: Big or Small, We Provide the Same Products and Pricing (FALSE)
This CEO believed that all credit unions (big or small) basically offered the same value. This implies nothing is really lost in a merger, and it might even expand the products and services of small credit unions. It is true, many of the smallest CUs don’t provide some advanced products – like mortgages, instant issue cards, or business loans. Does that mean the small ones provide inferior value?
It depends on how you define value, or more importantly, how those members define value. Many small credit unions provide unique products for their specific member group, like airline pilot training, union electrician or pipefitter tool loans, etc. If the small credit unions disappear, those unique products will likely disappear too.
At GAC 2026, then NCUA Chairman Hauptman talked about the “Special Sauce” of small Actors Federal Credit Union, because they understand the income and employment situations of actors and granted loans that big institutions wouldn’t. Likewise, I know of small credit unions that offer significantly lower fees and better rates than the big institutions around them, especially for those of modest means who tend to get overlooked at big institutions. These products and pricing are simply not the same, and there is clearly significant irreplaceable value to those unique memberships. So, who fills that gap if they are gone?
The Big CU Will Keep the Unique Loan Products After the Merger (UNLIKELY)
Small credit unions can design and launch unique niche loan products at a fraction of the cost of big credit unions, and the small volume isn’t a problem – as it may be plenty for the small credit union. Is the big CU in a merger going to retain a cornucopia of strange little loan products only utilized by 50 borrowers, from one city? Unlikely.
Instead, they will prioritize high volume loans that can be offered to the entire membership, at the lowest cost. So, after the small CU disappears, so will those unique loan products.
3. Special Sauce Service is Retained Despite Growth (FALSE)
Any credit union can have amazing service, big or small. Many big credit unions have perfected their service capabilities at levels that are hard to fathom (and cost efficiently, of course).
However, it’s increasingly difficult for a growing credit union to maintain the local community touch as they grow. This is especially difficult when they expand into distant cities or states – because they become increasingly generic to serve a broader group. It’s not bad, it just… is. As that progresses, there are people in those communities less likely to be served because they don’t “fit the box.”
Case in point: One of my supervisory auditors worked at a small credit union through a merger. She used to spend 30 minutes a month helping an elderly special-needs women balance her checkbook, but after the merger she was told it had to stop, because she was only allowed a maximum of three minutes of time per member. That elderly woman with special needs was turned away. Now scale that. Yes, all CUs are different, and some big ones may have responded differently – but honestly, how many?
There’s a small percentage of the population who prefer small credit unions over big ones. How do we know? Because these members tell us so. They aren’t just switching back and forth between CUs when they get angry, these folks are intentionally seeking out the smallest institution, because that’s their preference.
4. The Small CU Employees Will Keep Their Jobs (UNLIKELY)
With mergers between like-size CUs, fair enough, there is probably a good chance that many employees are retained. However, what about at a small credit union, and for how long?
The culture of big CUs is vastly different than a small CU, and how long will those small CU tellers last if they can’t meet aggressive new sales requirements? Who is going to help that elderly woman balance her checkbook now?
5. Growth is the Only Metric That Matters (But What is the Goal?)
So, whoever grows the fastest must be providing the best value, and is therefore the only credit union that deserves to survive? How does that jive with the *purpose* of our credit union movement (or our tax exemption)?
Allow me to quote Amanda Habansky, President/CEO of Peoples Advantage FCU:
“Credit unions weren’t chartered to be better-priced banks for anyone who walked in the door. They were founded to promote thrift and extend credit to people of modest means, the wage earner who couldn’t get a loan from a commercial bank, the family without credit history or collateral that traditional lenders required. The Federal Credit Union Act didn’t charge us to simply “serve members well.” It charged us to serve people who have few options, or no options at all.”
Why We Exist
Returning our profits to the common-bond communities we serve (especially the underserved) is why we exist. Now, obviously, you must be healthy to return value to members and *shrinking* isn’t sustainable. Also, yes, some growth is good and that allows us to offer better products and services. Also, yes, to some extent people vote with their feet (which helps indicate value).
However, this ignores a few things, like advertising budgets! If a giant credit union’s advertising outspends a small one at a factor of 1,000 to 1, of course they will grow quicker while the small one will struggle. This has little to do with value, and everything to do with advertising dollars spent. Should *growth* be the penultimate mandate and metric, or can that betray our foundational purpose?
A Note to Small Credit Union Leaders
If you are a small credit union CEO with sufficient capital, the best response to these difficult times is not to become a miniature version of a bigger institution.
Instead, I suggest you lean into things only you can do. Give value back to your members in ways that are concrete and meaningful, like flexible underwriting for people of modest means or niche products that fit your specific membership. Large credit unions can often match or beat you on complex products and maybe their polished service from their dedicated call centers, but they will often struggle to match you on intimacy and flexibility. You have a genuine competitive advantage, if you choose to use it.
The members who prefer small credit unions are not just imagining the difference, so keep giving them reasons to choose you!
All Perspectives are Valuable
It was a fantastic and stimulating conversation. The “big” CEO wasn’t unkind or dismissive at all, they were smart, experienced, fair-minded and authentic. However, that CEO is operating from a different reality, one shaped by scale, efficiency targets, and the daily pressure to grow. I can understand that pressure to some small degree, as I’ve lived in both worlds. Regardless, the unique value small credit unions deliver isn’t theoretical.
Growth and health matters. But if the only institutions left are those that are indistinguishable from banks, we will have grown ourselves into a problem that no amount of scale can solve.
The question isn’t whether both big and small credit unions can deliver unique value within their spheres, because they both clearly can. The question is whether we still believe the original purpose is worth protecting, because when those small hyper-local credit unions disappear, part of our credit union identity is lost, too.
Doug Wadsworth is president of Tri-CU Union in Kennewick, Wash., and president/founder of the Endangered Small Credit Union Defense. His handbook for small credit union officials, The Board Member Bible, is available on Amazon. ESCUD advocates regulatory relief for small credit unions under $500 million in assets. It is endorsed by 38 small credit unions across the nation, representing more than 250,000 members and $2 billion in combined assets. Wadsworth can be reached at [email protected].
3 Responses
If only a whole industry could be defined by a bunch one-off situations used repeatedly. The persiegtive matters. Including how a large CU is defined.
1) large cu’s have broad suites of personal loans and lines that can be used for pilot training, tool loans or whatever the member wants.
If small cu’s don’t offer mortgages and cards does it mean they they offer less value? No, not on the products they do offer. It means they are incapable of meeting the core borrowing needs told members and force them to go elsewhere, who will be happy to sell them their other products. This might be why small cu’s grow at far inferior rates. You have your members over to large cu’s and then complain about them being growth oriented.
Any objective data on pricing? How do yields, fees, margins and COF compare among small and large cu’s. Better financial value would show up there.
2) no, perhaps large cu’s dont keep the pet products. Why would they? They have a far broader p set induct suite. How concerned were the members in the industry who voted to merge with a large cu about this? There have been thousands of small cu’s merged, yet the industry keeps growing. Why do members stay at large credit unions if their service and value go away after a merger?
3) Ah, the balance the checkbook thing. One, time, at band camp. This is where you might go sit in the branch of a 10 billion cu for a day. You might learn something. In addition to your one-off is there any objective data that mihh guy to suggest the differences of member service among small and large cu’s? It’s not membership growth, it’s not product usage, and it’s not member sat where comparably measured by things like NPS. So what is it?
4) will they keep their jobs? Not all. Large cu’s need qualified employees. So all large cu’s have aggressive sales targets? Or, did your cousin meet a guy who’s brother worked at one that did?
5) it’s insulting to large credit unions to broad brush them as being focused on growth above purpose, member value, etc. still waiting for a large cu ceo to tell me they have daily pressure of grow. And, you have it backwards. Growth is an outcome, not a primary focus. No mystery here. Offer products your members need at a good value, invest in your community, offer convenience with branches and digital, and provide good service. Do those things, and you grow.
There you go on the marketing thing again. Of course large cu’s spend more in whole dollars, but not necessarily per member. When you acknowledge you know little about large cu’s, this is one area you have a lot to learn. Although fair to acknowledge that large cu’s spend marketing dollars to compete for the “complex” products like mortgage, cards and business.
Hi again to this same person hiding behind anonymity:
As I have pointed out in your previous challenge on this, “whole dollars versus per member” advertising spending isn’t really relevant… if you can spend $1,000,000 in a month in a community, while the local small CU can only spend $500, what difference does that make, realistically? And what about when you move your giant CU into a tiny distant community and you don’t have any members there yet but still spend $1,000,000 to blanket the town… how does that affect your “per member” spending ratios?
You want financial value comparisons? My small credit union doesn’t charge ANY NSF fees, and only $10 for courtesy pay. What about you? I bet we usually have lower loan rates than you. Our phone call “on hold” time is probably lower, and we charge lower mortgage fees too. I bet our kids club pays better dividends, and is more fun than yours. We paid special dividends multiple times last year (geared towards lower income folks), did you? We approve a higher ratio of mortgages to Hispanic populations than any other FI in town (HMDA data). We serve many members who are overlooked at big institutions, and approve loans for them by looking way outside the box (which can take lots of time, and isn’t always horribly efficient… but we are a not-for-profit, we often do it anyway – which justifies our tax exemption). Sure, you might have a higher CD rate for gigantic balances… but that’s not our members. You might offer business loans… but that’s not our members. You might have dozens of beautiful branches in distant cities and states…but that’s not our members.
The rest of your arguments aren’t really worth responding too AGAIN (the same ones you have used before). There are some things we will never agree on because we live in different realities… and you have NEVER worked at a small credit union (so you just don’t know). I’m sure I would make be a dismal failure as the CEO of a giant CU – but I don’t care.
I will say it again – I have seen the special difference that small CUs make in their small communities, and I know what would be lost if we are gone. Your philosophy leads to a world with only big CUs, which (like it or not) the public sees as indistinguishable from banks. I just don’t see how a tax exemption can survive. Of course, you will still have your 7-figure salary, regardless. So, cheer up, don’t be so angry!
-Doug Wadsworth
Not angry. Just think people who discredit the industry, fight the wrong battles and play into the hands of the bank lobby, all the while and defaming large credit unions should be called out. You get challenged to try and come at this from an industry to support your little one-offs, “ I talked to 1 large cu CEO, my director helped a lady balance a checkbook, and another small CU got their feelings hurt by a regulator, in part because it’s unfair to them to have to know acronyms” theories with objective, macro, industry-level data and you simply can’t. You come back instead wanting to compare fees among two credit unions. SMH.