4 minutes
SRM research reinforces what many boards and C-suites at community banks and credit unions are feeling. A three-front race is underway to:
- Achieve economies of scale.
- Attract younger members.
- Deliver the consumer-grade technology people now expect from their primary financial institution.
These Three Imperatives Are Interconnected
Winning with younger members requires delivering the digital experiences they prefer. For credit unions, that means heavier investment in technology and growth—funded by the incremental earnings that come with scale, which remains elusive for many.
The speed and ease provided by front-edge technology help explain gains by larger institutions in satisfaction scores. American Consumer Satisfaction Index (ACSI) trends show big banks overtaking smaller institutions, driven in part by "good enough" tech. Large FIs and fintechs are growing faster by meeting demand for competitive rates delivered through simple, fast, always-on experiences.
The Need for Scale Is Front and Center in Boardrooms
At the start of many credit union board sessions, I ask what a "good growth rate" looks like. Most vote 5%–10% as an indicator of product-market fit with current and prospective members.
In 2024, among 4,483 U.S. credit unions:
- 2,379 had no member growth
- 2,104 grew membership
- 410 grew members by more than 5% (average asset size: $2.28B)
Yet, $2.28 billion in assets is not "economies of scale" and management/boards know this as their experience (and SRM's research) points this out. Executives and boards with high expectations for performance are discussing what needs to happen to accelerate member and share growth. Often, marketing gets scrutinized. Also getting attention is the field-of-membership category, geographic and product expansion, and overall member value.
Demographics and Technology Are Defining the New Growth Story
Many executives report an average member age north of 45; the World Council of Credit Unions places the U.S. average around 53. Members under 45 gravitate to the six largest banks as their primary financial institution, drawn by abundant branch networks, preferred technology, and competitive pricing. Notably, at least 82% of U.S. banking now occurs without human interaction (ABA), underscoring the centrality of digital.
Earnings Are Interconnected to Growth
Credit unions are not-for-profit, but net income powers growth—funding technology, competitive rates, and productive marketing.
A snapshot of 2024 income (ROA before fees: net interest income minus non-interest expense):
- 4,124 credit unions made less than $1M (average assets: $83M)
- 386 made more than $1M (average assets: $3.01B)
- 2,292 had no income before fees (average assets: $440M)
Our research, first presented at the NCUMA Summer Conference, highlights a common thread among the fastest growers—sustained ROA at the high end over multiple years.
Top 25 Growth Credit Unions ($1B+ assets, past five years):
- 6 achieved most of their growth via selective fintech partnerships.
- 12 completed one or more mergers.
- 6 relied solely on organic growth – these are quite large and enjoy much higher core earnings.
- 1 leaned heavily on indirect lending.
Each path carries pros, cons, and risks. What is clear, however, is that the risks of "staying the course" outweigh the potential positive outcomes of merger, fintech partnerships, and new approaches to organic growth.
What High-Intent Boards Are Doing Next
Across boardrooms, determined to sustain member value and support financial health, conversations are intensifying. We expect continued exploration of:
- Fintech partnerships to augment capabilities and speed to market.
- The strategic role of mergers within long-term plans.
- Using technology to deepen existing relationships and increase household penetration.
The credit unions that move deliberately on these fronts, aligning strategy, growth, and earnings, will be best positioned to achieve scale, attract and retain younger members, and deliver the technology experience that keeps them loyal.
Pete Duffy, Managing Director of Merger and Acquisition Strategy, leads SRM's merger advisory engagements with financial institutions across North America. Pete spent 20 years working with financial institutions on the development and execution of their merger and acquisition strategies at Piper Sandler. He is a well-known speaker and thought leader in the world of M&A and is a graduate of Texas Christian University.
