Washington, D.C. — The financial landscape in 2025 is witnessing a seismic shift as credit unions increasingly acquire community banks, a trend that has eroded the long-standing rivalry between these institutions. According to data from American Banker and S&P Global Market Intelligence, credit unions announced a record-breaking 22 bank acquisitions in 2024, surpassing the previous high of 16 in 2022, with eight more deals proposed in 2025 despite a slower start. This surge, driven by economic pressures, regulatory changes, and strategic growth ambitions, is reshaping the mergers and acquisitions (M&A) market, raising concerns among community bankers about competitive imbalances while offering opportunities for local communities to retain financial services.
The Rise of Credit Union-Bank Acquisitions
Historically, credit unions and community banks have been rivals, competing for similar customer bases with localized, relationship-driven services. However, the M&A market has seen credit unions emerge as significant buyers of community banks, particularly smaller institutions struggling to find merger partners. American Banker reported that in 2024, credit union-bank mergers accounted for nearly one-fifth of banking industry deal activity, with total target assets hitting a yearly high. Key examples include:
- Spokane Teachers Credit Union (STCU): In 2024, STCU acquired the $550 million-asset Community Bank in Joseph, Oregon, to create a $6.4 billion institution with 49 branches across Washington, Oregon, and Idaho, expected to close in early 2025. STCU plans to retain all employees and maintain the bank’s 10 branches.
- TDECU: The Houston-based credit union, with $4.7 billion in assets, announced in April 2024 the acquisition of the $1.2 billion-asset Sabine State Bank and Trust in Louisiana, aiming to expand its commercial portfolio and reach, with a projected close in early 2025.
- DFCU Financial: This Michigan-based credit union acquired Winter Park National Bank in Florida for $845 million, marking its second Florida deal in two years, following the 2023 purchase of First Citrus Bancorporation.
- HAPO Community Credit Union: In 2024, HAPO agreed to acquire Community First Bank in Kennewick, Washington, marking the 18th credit union-bank deal of the year and the fifth in Washington, set to close in Q3 2025.
These deals reflect a strategic shift, with credit unions leveraging their tax-exempt status and financial flexibility to outbid traditional bank buyers, particularly for smaller institutions with assets under $500 million.
Drivers of the Trend
Several factors are fueling this wave of acquisitions:
- Economic Pressures on Community Banks: Smaller banks face rising compliance costs, margin pressures, and challenges competing with larger institutions in a high-interest-rate environment. eMarketer noted that community banks struggle with an aging customer base and outdated technology, making them attractive targets for credit unions seeking scale. Mergers offer a lifeline, allowing banks to avoid closure and maintain local services.
- Credit Union Ambitions: Credit unions are acquiring banks to diversify into business lending, expand geographic footprints, and gain advanced digital capabilities. eMarketer highlighted that these deals enable credit unions to block competitors, add expertise, and drive economies of scale. For example, U.S. Eagle Federal Credit Union’s acquisition of Southwest Capital Bank in 2024 aimed to deepen its cannabis industry services.
- Tax-Exempt Advantage: Community bankers argue that credit unions’ tax-exempt status gives them an unfair edge in M&A, allowing higher bids—often 1.5 times tangible book value or more—due to lower operating costs. Bank Director reported that 91% of banks open to selling expect such premiums, but only 40% of bank buyers are willing to pay them, making credit unions more competitive.
- Regulatory and Market Shifts: The anticipated M&A boom in 2025, driven by lower interest rates and regulatory easing under a pro-business administration, has created a fertile environment for consolidation. Banking Dive noted that banks are preparing for increased deal activity, with credit unions capitalizing on pent-up demand from 2024’s slower market.
Controversy and Community Impact
The trend has sparked controversy, particularly among community bankers who view credit unions as leveraging their tax-exempt status to “fleece taxpayers” by removing tax-paying banks from local markets. John Asbury, chair of the American Bankers Association, told American Banker that the record 22 deals in 2024 led to a slowdown in 2025 due to regulatory scrutiny and industry advocacy, with only one deal announced by March 2025. The Independent Community Bankers of America (ICBA) has called for ending tax exemptions for credit unions with over $1 billion in assets, arguing it distorts the M&A market.
However, credit unions argue they are preserving community access to financial services. America’s Credit Unions emphasized that these mergers are voluntary, with bank boards choosing credit unions to sustain local branches, jobs, and economic benefits over closure. For instance, STCU’s acquisition of Community Bank ensured all branches and employees remained, maintaining local economic contributions.
Will the Trend Continue?
The sustainability of credit union-bank acquisitions depends on several factors:
- Bullish Case: Lower interest rates expected in 2025, as signaled by Federal Reserve Chair Jerome Powell, could boost M&A activity, particularly for rate-sensitive sectors like banking. BAI and Cherry Bekaert predict a surge in deals as banks seek scale to meet compliance and tech demands. Credit unions, with their financial flexibility, are well-positioned to continue acquiring smaller banks, especially in regions like Washington, where five deals occurred in 2024.
- Bearish Case: Regulatory pushback and banking industry advocacy may temper the trend. ABA Banking Journal noted that increased opposition and policy scrutiny slowed deals in 2025, with many 2024 deals still awaiting approval. Rising bank stock valuations could also bring traditional bank buyers back, reducing credit unions’ competitive edge, as suggested by Bank Director.
- Market Dynamics: The broader M&A market is heating up, with SRM Blog forecasting a resurgence in 2025 due to technological disruption and consumer expectations. However, credit unions face their own challenges, including declining membership at smaller institutions (down 7.8% year-over-year for those under $10 million in assets) and adoption lags in real-time payments, which could limit their M&A capacity.
Local Context
In Kansas City, Kansas, where the tragic death of Police Officer Hunter Simoncic on August 26, 2025, has dominated local attention, the credit union-bank M&A trend has not been a major focus. However, the region’s financial institutions, like Mainstreet Credit Union, could be affected by national trends, particularly if local banks become acquisition targets. Posts on X reflect mixed sentiment, with some praising credit unions for saving community banks—“Keeping branches open is huge for small towns”—while others echo banker concerns about tax advantages: “Credit unions are eating banks alive with that tax break.”
Conclusion
The record 22 credit union acquisitions of community banks in 2024, with eight more proposed in 2025, marks a transformative shift in the M&A market, eroding the traditional rivalry between these institutions. Driven by economic pressures, credit unions’ tax advantages, and strategic growth goals, these deals are preserving local banking services but sparking controversy over competitive fairness. While lower interest rates and regulatory easing could sustain the trend, pushback from bankers and potential market shifts may slow its pace. As the financial landscape evolves, the balance between community preservation and competitive equity will shape the future of these acquisitions.
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This article has been reviewed for grammar and clarity to ensure accuracy and readability for a U.S. audience.