By Jason Stverak

Community banks and credit unions share a mission: serving their communities. In recent years, a growing number of community banks have chosen to sell to credit unions. As someone who advocates for credit unions, I believe this trend deserves praise, not skepticism. 

When a bank joins forces with a credit union, the result is a win-win – a smooth transition for the selling bank, better service for its customers, and a stronger local community. Below, I outline why these partnerships benefit all involved and address some common misconceptions along the way.

A Smooth Transition for Community Banks

For a local bank board facing tough headwinds or planning for retirement, selling to a credit union can be the best path forward. A credit union is often the natural partner when a community bank can no longer continue on its own. Instead of leaving town or closing shop, many banks choose a credit union buyer to ensure their customers aren’t left “high and dry” without local banking services. This decision is about protecting the bank’s legacy and neighbors.

Credit unions specialize in continuity. Bankers who have served their town for decades want to keep branches open, employees on staff, and a hometown institution in place. They look for a buyer who will maintain a local presence and care for their customers. Often, they find that credit unions check all those boxes. 

In fact, a recent survey found that a majority of community bank CEOs who sold to credit unions did so because credit unions were more likely to preserve the bank’s branches, services, and employees long-term. From the selling bank’s perspective, this kind of transition isn’t a failure – it’s a responsible handoff that ensures their community will continue to be served by a local, community-focused institution.

Member-First Benefits for Customers

When a bank’s customers move to the purchasing credit union, they cease being simply account numbers and become member-owners of a financial cooperative. This member-first model means the institution exists to serve them, not outside shareholders. The practical result? Lower fees and better interest rates. Credit unions reinvest earnings back into member benefits rather than paying dividends to stockholders. 

For example, the Credit Union Membership Benefits Report found that the average credit union member saves about $220 per year in fees compared to a typical bank customer. And that’s just on fees – members also tend to get higher yields on their savings and lower rates on loans, which adds up to over $12 billion in direct financial benefits to members each year in the form of better rates and lower costs.

It’s not only about dollars and cents. Credit unions pride themselves on consumer education and personal service. By offering safe, affordable products and reinforcing good financial habits, they’ve helped generations of Americans achieve their financial dreams. Former bank customers often discover that as credit union members, they have a voice in how the institution is run and a financial partner that genuinely puts their interests first. 

The proof is in the outcomes: roughly 404,000 bank customers who became credit union members through bank-credit union mergers in the last decade have collectively gained over $41 billion in financial benefits since making the switch. That is money back in families’ pockets through lower loan payments, higher savings returns, and fewer fees – a tangible improvement in everyday peoples’ finances.

Strengthening Communities and Local Economies

The greatest impact of these acquisitions is felt community wide. When a bank sells to a credit union, it keeps local banking services in the community instead of seeing them absorbed by a larger out-of-town institution. Deposits remain local and can be reinvested as loans to local consumers, entrepreneurs, and homebuyers. In many cases, this prevents the emergence of banking deserts in rural or underserved areas. 

In fact, about 80% of bank sales to credit unions have involved credit unions designated to serve low-income communities, where maintaining a financial institution is especially critical. In other words, credit unions are often stepping in to serve areas that might otherwise be left behind, underscoring their mission to provide financial access to those who need it most.

These partnerships also help ensure that community banking jobs and civic engagement remain in place. Unlike big banks that might shutter a small-town branch if it’s not meeting quarterly profit targets, credit unions don’t abandon communities just because profit margins are thin. They are committed to their members in all areas, urban or rural, prosperous or struggling. 

What Studies Show

Studies have noted that credit unions frequently preserve services that would otherwise disappear; they typically don’t close branches just because they’re less profitable in rural or underserved areas. That means the local branch staff – familiar faces who know the customers by name – usually keep their jobs, and the community keeps a convenient banking location. The result is a stable local economy: small businesses still have somewhere to deposit their earnings and get loans, residents still have access to financial services, and the town retains an employer and community partner.

Importantly, the economic benefits generated by the credit union model stay within the community. One industry analysis put it plainly: when a bank sells to a credit union, it keeps the benefits local to that community, whereas selling to another bank often just enriches distant executives and shareholders. Credit unions have no incentive to extract profits and cut services; instead, they thrive only when their members and communities do. 

In a very real sense, these acquisitions turn what could have been a story of a town losing its bank into a story of community reinvestment. A bank selling to a credit union often leads to more local lending, continued support for community events and charities, and an institution that will put community needs above short-term gains. A trusted local banking option is preserved, and neighbors continue to have a financial institution that knows and values them. All of this strengthens the fabric of the community and local economy.

Clearing Up Misconceptions: A Voluntary Win-Win

Despite the clear benefits, a few misconceptions about credit unions buying banks have cropped up. It’s important to set the record straight by focusing on facts. First, every one of these bank sales is voluntary and mutually agreed upon. There is no “takeover” happening; a credit union cannot buy a bank unless that bank’s owners want to sell. In practice, these transactions are approved by the bank’s board and shareholders and vetted by regulators like any other acquisition. They are also subject to applicable taxes and fees, just as a bank-to-bank deal would be.

Far from being some kind of end-run around the rules, these sales follow all the normal procedures – the only difference is the buyer’s charter. In short, these sales are not forced in any way; they’re board-approved, above-board transactions that are ultimately win-win for all parties involved.

Why would a bank’s board choose a credit union as a buyer? Simply put, because it’s often the best outcome for everyone. Bank owners willingly sell to credit unions when it’s the best option for their customers and employees. 

What GAO Said

Even a 2022 Government Accountability Office study noted that many community banks struggling with profitability see credit union offers as an attractive way to ensure their community continues to be served. So, the motivation is to do right by their community, not because of any coercion or loophole.

Second, these transactions are relatively rare – and hardly the “takeover” some portray them to be. Since 2012, around 100 banks in the entire U.S. have been acquired by credit unions, compared to over 2500 that merged into other banks. That’s 3% of all bank sales over more than a decade. Put differently, for every community bank that chose a credit union buyer, more than thirty have chosen to merge with or be bought by another bank. 

The largest banks still control the vast majority of financial assets in this country, whereas credit unions remain a small slice of the pie. There is simply no evidence that credit unions are “gobbling up” the banking industry – the data shows the opposite, that these deals are exceptional occurrences, undertaken when they make sense for the parties involved.

Finally, some have pointed to credit unions’ tax status to argue these acquisitions are “unfair.” This critique misses the mark.

Subchapter S Banks and Tax-Minimization Strategies

Many banks pay no corporate income tax: The op-ed counters the criticism that credit unions’ tax exemption is unfair by highlighting that numerous banks also utilize tax loopholes. The key example is Subchapter S banks. Roughly one-third of all U.S. banks – mostly community banks – elect Subchapter S status, which allows them to avoid corporate-level taxes and instead pass income through to shareholders . (In fact, as of year-end 2020 there were about 2,036 Subchapter S banks out of ~5,000 banks nationally , roughly 40%.) These Subchapter S banks pay no federal corporate tax, mirroring the tax advantage that credit unions have. In other words, banks too can minimize tax obligations – it’s a common strategy for smaller banks to reduce their tax bills, undermining the argument that only credit unions enjoy tax benefits.

Moreover, when a taxable (Subchapter C) bank is acquired by a tax-exempt credit union, the sale does incur taxes – it’s structured as a purchase-and-assumption transaction that is taxed at the bank’s level, unlike a tax-free bank-to-bank merger. And post-merger, credit unions still pay property, payroll, and sales taxes like any business . Thus, the overall tax impact isn’t as one-sided as critics imply: many banks already use the tax code to their advantage (via Subchapter S), and the bank sellers do contribute tax revenue when they sell to a credit union.

Earning the Tax Exemption

Credit unions have a tax exemption because they are not-for-profit cooperatives that return value to their members and communities. That’s exactly what happens when they buy a community bank: the community’s deposits and loans shift into an institution designed to maximize consumer benefit, not profit. 

Meanwhile, the transactions themselves are taxable events for the sellers, contributing to public revenues just like any other sale. In the end, what matters is the impact on consumers and communities, and by that measure these partnerships are overwhelmingly positive. It’s telling there has been no outcry from the affected customers or communities – the people who actually experience these transitions view them as a win. The narrative of “unfair advantage” comes mostly from competitors, not from the local residents now enjoying lower fees or the bank employees who kept their jobs. As one commentator aptly noted, claims of a problem here are “simply untrue and uninformed,” given that the evidence shows no consumer harm and indeed plenty of consumer benefit.

Serving Communities Better – Together.

The big picture is clear: when community banks and credit unions work together, their communities are the ultimate winners. Rather than being rivals, local banks and credit unions are often natural allies in putting people first. These voluntary partnerships ensure that hometown banking service continues and even improves. It’s a model of cooperation that should be celebrated and encouraged by policymakers, not hindered. After all, keeping a branch open on Main Street or on a military base is far better for consumers than seeing it closed or absorbed by a megabank that has little stake in the community’s future.

As an advocate for credit unions, I am heartened to see financial institutions coming together in this way. Serving and leading DCUC’s advocacy strategies, I’m well aware of examples where our member credit unions, defense credit unions, step in to keep branches operating on military installations so that service members and their families always have access to affordable financial services. 

Whether it’s on a base or on Main Street, that same spirit of community service drives these deals. Credit unions remain deeply proud of their “people helping people” mission and will continue to earn the trust communities place in them — focusing especially on those everyday people that banks may leave behind. They’ll continue doing what they’ve done for decades: putting people over profit, every time.

It’s No Wonder

So, is it any wonder a community banker might choose a credit union as a buyer when the time comes? Together, banks and credit unions can ensure that local customers are cared for, local employees are retained, and local economies are invested in for the long haul. In an era when too many rural towns and city neighborhoods worry about losing their only bank, these collaborations shine as a positive alternative. They demonstrate that our financial institutions – regardless of charter or tax status – can work hand-in-hand to put community first. That’s a trend we should all applaud and encourage, because when a bank sells to a credit union, everyone wins.

Jason Stverak is Chief Advocacy Officer with the Defense Credit Union Council. For info: www.dcuc.org.