Credit Union Mergers: The Complete Guide to Member Voting and Strategic Success

Credit union mergers were once considered an emergency measure. Today, they’re also used as a strategic growth tool. As the number of federally insured credit unions fell below 4,600, regulators approved a staggering 162 mergers in 2024.

Why is this happening? Far from being a tool used as a result of financial distress, modern credit unions merge for many reasons, such as:

• Expanding their membership
• Upgrading technology
• Reducing operating costs
• Planning for leadership succession
• Becoming more competitive with fintech companies and national banks

This new approach to mergers is a massive shift in how credit union leaders view consolidation. See how new approaches to mergers are changing the industry, plus tips for making the most of your credit union merger.

Mergers of Equals: A Growing Trend Requiring Special Attention

In a traditional merger, a larger institution absorbs a smaller one. However, recent transactions have focused more on mergers of equals (MOEs). With this setup, similarly-sized institutions combine forces to work in partnership.

MOEs are different for several reasons, including:

• Shared leadership: Rather than a single CEO taking complete control, MOEs typically have co-CEOs. They carefully negotiate leadership succession to give both credit unions an equal voice.
• Cultural integration: Instead of a bigger institution calling the shots, both institutions in the MOE contribute to a combined culture. You’re free to hold onto your mission and values that matter most.
• Brand decisions: Instead of allowing both credit unions to retain their names, MOEs usually create entirely new brands. This might sound like more work, but it establishes a shared culture and understanding between both institutions by starting from a blank slate.
• Board composition: MOEs typically have directors from both institutions serving on a combined board.

If you think your organization is too small to participate in a merger, think again. With MOEs, you can combine resources with another credit union to better serve the community, all while holding onto your mission and culture.

How to Design a Successful MOE

A merger of equals inherently fosters more collaboration, but you still need to plan it carefully. Consider these factors to plan a lasting partnership:

• Align on long-term vision: Only merge with a credit union that aligns with your philosophy and culture. Both leadership teams need to have the same core beliefs about the credit union’s mission and member service. If you’re unaligned, you risk butting heads on joint leadership decisions.
• Be transparent in negotiations: Honesty goes a long way at the negotiating table. With an MOE arrangement, both parties need to “win.” Compromise is crucial to avoid the perception that one institution is secretly dominating the arrangement.
• Make a member communication plan: Members will wonder why two healthy institutions are merging. Both credit unions need to contribute to a carefully planned member communication strategy. This approach will preserve member trust and prevent unnecessary suspicion about the nature of the merger.
• Expect a longer rollout timeline: Since you want to honor both institutions’ contributions, MOEs typically require longer planning and integration periods. Expect the merger to take longer than a traditional one—patience is key to ensuring the merger works for everyone.

The Member Vote: Your Merger's Critical Success Factor

Whether you’re doing a credit union consolidation or a merger of equals, you need member approval to make it happen. However, voting on a merger is often unpredictable. After all, members aren’t just customers; they’re owners with voting rights on major institutional changes.

The National Credit Union Administration (NCUA) requires all credit unions to follow a specific process for merger votes. Follow this checklist to fulfill your responsibilities.

Pre-Vote Requirements

Before a merger vote takes place, the NCUA requires you to:

• Provide advance notice of voting dates and procedures to all voting members.
• Rationalize the merger.
• Provide financial statements from both institutions.
• Disclose which changes you’ll make to your branding and operations.
• Clarify voting instructions for all possible voting methods, from mail-in and in-person ballots to digital voting.

Voting Process Standards

Communication is a major requirement for a credit union merger vote, but your voting process must also withstand regulatory scrutiny. Follow these requirements to plan a compliant election:

• Ensure secure ballot delivery and collection.
• Offer multiple voting options, such as by mail, in person, or digitally.
• Administer the election with a third-party to ensure transparency.
• Certify the vote and document it.

Approval Thresholds

You need enough votes in favor of the merger to proceed. However, before voting starts, you need to clarify your approval thresholds.

In most cases, you need a simple majority. You’ll likely need to meet a quorum, which often ranges from 10% to 30% of eligible voting members, to call an election in the first place.

Keep in mind that these are just the NCUA’s guidelines. Your local government or bylaws may dictate additional requirements, so be aware of this when planning a merger vote.

The Cost of Waiting: Why Early Planning Matters

Many credit unions wait to plan a merger vote until they have regulatory approval. That may sound like a great idea, but delaying your election plan risks:

• Unrealistic timelines: Waiting for NCUA approval gives you less time to educate members about the change. It also compresses timelines, giving you less time to decide on and communicate complex financial decisions.
• Member surprise: Members will feel blindsided if they learn about a merger at the last minute. If they feel skeptical about the sudden change, they’re less likely to participate in the election, let alone support the merger. Taking action now gives you time to educate members on the benefits of the merger and explain how it will affect them.
• Compliance pressure: Shorter timelines give you less time to consider regulatory issues. For example, failing to meet communication deadlines or other small requirements could invalidate your vote. That’s why it’s so crucial to plan your member engagement strategy now, the moment merger discussions are becoming serious.

Start planning your merger vote while waiting for regulatory approval. While you can’t act on a merger without NCUA approval, having an election plan waiting in the wings will set you up to take action ASAP.

The Board's Fiduciary Responsibility in Merger Decisions

If you serve as a credit union director, you have to follow your fiduciary duties. More than an opportunity for resource sharing, credit union mergers can have a significant impact on members’ finances. Run these crucial analyses to ensure the merger benefits members from all backgrounds.

Financial Analysis

The financial analysis is the most crucial fiduciary report. You and a potential partner should review each other’s financials. That includes working with analysts to stress-test a partner’s finances under various scenarios.

From there, conduct an assessment of a combined entity’s capital. There should be enough capital on hand not only to manage the merger but also to continue acting in members’ best interests. You should be able to analyze these reports and determine whether the merger will lead to gains in operational efficiency.

Member Impact Assessment

Next, consider how the merger will affect your members. That includes understanding changes in:

• Product features
• Pricing and fee structures
• Service availability
• Branch access
• Technology platforms and features

Members will want to see an increase in offerings and either stable or lower fees. That isn’t always realistic, so understanding the merger's positive and negative impacts on members will be crucial to helping them make an informed vote.

Cultural Compatibility

Finally, look at culture fit. Visiting a branch and seeing employees’ “vibes” in person can be helpful, but you should also look at a potential partner’s:

• Leadership philosophy
• Member service approach
• Consistency of service
• Community involvement
• Staff treatment
• Retention plans and training

It can be difficult to uncover cultural issues in a potential partner, but it’s worth investigating. Mission is everything for credit unions, and taking the time to find an aligned partner will prevent many headaches down the road.

Common Merger Vote Failures and How to Avoid Them

Even a financially sound merger can fail when it’s time for members to vote. Learn about common merger vote failures and how you can prevent them.

Quorum Threshold Failures

Most credit unions need a minimum amount of participation to hold a valid election. But if members fail to engage, all your hard work will be for nothing.

Failing to achieve quorum is a challenge for most associations, but it often indicates a lack of member engagement. Quorum is the first hurdle in the election process, so start engaging with members early to boost participation. You can improve the possibility of reaching or exceeding quorum by:

• Offering convenient voting options, like digital voting.
• Providing compelling reasons to participate, such as reminding voters that the election gives them a voice and offering incentives to encourage engagement.
• Tracking participation in real time, which can help you communicate with members while the vote is ongoing.
• Sending targeted outreach to people who haven’t voted yet.

Communication Confusion

Members don’t have the time to dig into complex financial information. Not only can merger language be complicated, but poorly executed communications plans also add to the confusion.

As a credit union leader, it’s your job to minimize confusion as much as possible. That means:

• Using consistent language across all platforms, whether you’re engaging with members via social media, direct mail, email, or in person.
• Testing communications with member focus groups. A simple split test (also called an A/B test) is a great way to test emails or SMS messages.
• Providing simple, step-by-step voting instructions. Provide these instructions via direct mail, email, or even in videos embedded in the voting platform. 
• Anticipating questions. Not only should you provide in-depth FAQs for common questions, but you should also offer opportunities for members to do board Q&As.

Trust Deficits

Trust is everything in a credit union. Unfortunately, a poorly managed merger can erode member trust. If members suspect the merger is a bad deal, they may vote against the merger or abstain from participating altogether.

You need members’ trust before a merger vote, as well as a plan to preserve it during the election. How you’ve treated members historically plays a big role here, but you can improve trust in the short term by:

• Sharing detailed financial disclosures.
• Conducting an independent review that clearly spells out how the merger will benefit members.
• Hosting open Q&A sessions with leadership.

Procedural Missteps

One of the most common credit union merger failures is missing regulatory requirements. Credit unions are heavily regulated, and incorrect ballot language or improper vote certification can invalidate your results. Not only will this frustrate members, but it will also require expensive re-votes.

The challenge is that most credit unions don’t have the resources to ensure compliance. With so much at stake, it makes sense to partner with experienced third-party election administrators. These experts understand NCUA requirements and can ensure compliance at every step of the election.

The SBS and CUES Partnership: Get Comprehensive Support for Credit Union Mergers

Building an engaged membership isn’t easy, but it’s possible with the right help. Whether you’re a small credit union looking to combine resources or have a larger association in need of streamlined elections, go with partners who know credit union elections.

CUES and Survey & Ballot Systems (SBS) bring decades of election expertise to the table. CUES understands your unique challenges and ensures you have every resource you need for a successful merger. SBS brings the technical firepower by designing compelling election materials and managing every operational detail, from ballot distribution to tabulation.

Mergers Are About People, Not Just Paperwork

Credit union mergers are complex. While you should care about compliance and financial performance, mergers are ultimately about people. Your members need to trust you enough to approve such a significant change.

How you manage the merger process makes all the difference. To plan an effective merger vote:

• Assess where you are now. Consider your bylaws, regulations, and quorum requirements.
• Build a planning team that includes leadership, marketing, the board, and legal counsel.
• Develop a communications strategy to gather member feedback.
• Select partners, like CUES and SBS, to help with technology and administration.
• Create a detailed timeline with regulatory approvals, member touchpoints, and engagement events.
• Educate members. Before formally announcing the merger, educate members about your challenges and how a merger can solve them.

Whether your credit union is actively exploring mergers or just planning for the future, now is the time to prepare. Your members and your mission deserve nothing less than a thoughtful merger.

Survey & Ballot Systems, in partnership with CUES, provides turnkey support from initial planning through vote certification. Contact CUES today to discuss how to navigate credit union merger voting with confidence.

Tony Hoff is marketing director for  Survey & Ballot Systems . Since joining SBS in 2011, Tony has led company communications, branding, and product launches, maintaining SBS as the go-to for governance solutions. He regularly hosts educational webinars and speaks at national trade association events across the United States.  Tony’s expertise  has earned him media recognition, with features in outlets like Rural Electric Magazine, The Association Adviser podcast, Associations Now, and NBC’s King 5 Mornings in Seattle.