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When a bank becomes a credit union

By Claes Bell · Bankrate.com
Monday, December 7, 2015
Posted: 11 am ET

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We're in the middle of a long-term trend toward consolidation in the banking industry that's taking a somewhat weird turn.

Faced with economic headwinds and increased compliance costs, small banks are merging or being bought up in droves -- and some of those buyers are credit unions.

According to data from SNL Financial, a financial industry research firm, in the past 5 years, credit unions have acquired 8 banks or thrifts. Three were announced in 2015, 2 in 2013, 2 in 2012 and 1 in 2011.

Credit unions want to grow, too

Why would a credit union buy a bank? Credit unions, despite being not-for-profits, still want and need to grow. If a credit union is looking to grow more quickly than it could by advertising and word of mouth, it can sometimes make sense to buy a bank instead.

Last week, for example, regulators approved a deal for Florida-based Achieva Credit Union to acquire Calusa Bank in Sarasota. As soon as the transaction is completed, Calusa Bank customers will become members and thus part owners of the institution where they used to have their deposits.

What it looks like for consumers

While your bank being bought up by another institution can cause hiccups such as temporary inability to access your funds or submarining interest rates on your deposits, it seems like there could be some clear advantages for consumers whose banks are acquired by credit unions -- including higher interest on their deposits.

The most recent weekly Bankrate survey of deposit accounts throughout the country found that credit unions currently pay an average of 0.56% annually on 1-year CDs, compared with 0.1% at banks. Obviously, no one's getting rich either way, but more is generally better on interest, right?

Credit union members also have some privileges bank customers don't have, chiefly that they have a vote when it comes time to pick the credit union's board of directors, and thus help to shape the direction of the credit union.

What do you think? Would you want your bank to be bought up by a credit union?

Follow me on Twitter: @claesbell.

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