Credit unions are at the epicenter of a seismic shift in the financial sector. The nonprofit cooperatives—once known for their modest expansion—are buying up banks at record rates, with deals proposed in 2024 involving $7.21 billion in assets so far.

For community banks interested in selling, these all-cash buyouts have offered welcome relief amidst a wave of consolidation and slowdown in M&A activity. Credit unions, on the other end of the deal, are benefiting from rapid growth in their geographic reach, member base, deposits, and product lines.

But credit unions have a ways to go on the road to happily ever after. Recent bank purchases have sparked new debates about taxation, as well as challenges regarding customer retention and internal culture. To ensure successful acquisitions, credit unions need highly agile leaders who can quickly adapt to regulatory changes and market trends.

Adapting to Regulatory Changes on the Horizon

Credit union-led acquisitions have raised concerns about competition in the financial services industry. When the tax-exempt financial institutions purchase for-profit banks, the resulting arrangements fall into a legal gray area with little regulatory precedent. Critics like the Independent Community Bankers of America (ICBA) argue that these deals create an uneven playing field, allowing credit unions to rival retail banks without contributing to the government’s tax base.

States like Mississippi have vehemently opposed these transactions altogether, creating an uphill battle for credit unions interested in acquisitions. However, the most critical challenges come when regulations evolve after deals occur. As scrutiny heightens, credit union leaders must be prepared to meet new compliance demands in any given year—including future challenges to their current tax subsidization.

Unsurprisingly, our executive search team at AJ Consultants has seen a substantial increase in credit unions seeking financial executives with deep regulatory and risk management expertise, regardless of planned M&A activity. This trend is mirrored across the industry. Everwise Credit Union, for example, recently hired its first Chief Legal and Risk Officer, leveraging her background as a financial services attorney to continuously optimize compliance.

More than ever, C-suite leadership must include problem-solvers who swiftly align strategies with regulatory changes—always equipping their organization with a viable plan B. Additionally, credit union executives need to establish internal stability to ensure effective organization-wide responses to external events.

Strengthening Culture Post-Acquisition

When financial institutions are rocked by significant and ongoing change, the stability of organizational culture can help steer the ship in the right direction. However, bank acquisitions—which are disruptive events in themselves—combine the community-first mindset of credit unions with the largely commercial focus of banks, potentially creating a clash in values and priorities among employees.

According to McKinsey, credit unions must solidify their change management playbook to effectively scale through M&A activity. Executives play a key role in building out communications, clearly articulating values and goals, and encouraging employees to share their perspectives. Feedback loops are crucial in this process. To achieve alignment with acquired bank talent, credit union leaders must actively seek input from all levels of the organization. Executives can then address critical concerns—perhaps including employees in the development of solutions to win cultural and strategic buy-in faster.

An agile approach is important for successful change management. In the complicated post-acquisition environment, flexibility and responsiveness enable smoother transitions, especially in the first quarter following the purchase. Leaders must be open to refining their integration plans according to the needs of stakeholders—including both employees and customers.

Prioritizing Stakeholders After Bank Acquisitions

Credit unions frequently buy banks to expand and diversify their member base. Typically, membership growth significantly outweighs attrition, but capturing the full growth potential post-acquisition can be tricky. Consumers, much like employees, can be resistant to change and feel undervalued amidst the upheaval. The key to overcoming this resistance lies in the ability of the C-suite to maintain strong member relationships and build confidence in the direction of the credit union.

Executives must establish, communicate, and deliver a clear value proposition to current and potential members. For many credit unions, this means doubling down on their community focus. McKinsey reports customers prefer credit unions not only for their low-fee or fee-free structures, but also for their outstanding service. Credit unions can benefit from savvy leaders who prioritize the member experience—leveraging customer data to activate one-on-one touchpoints and personalization at the right times.

Immediately post-acquisition, streamlining costs should be a secondary concern. Executives must be free to innovate and elevate the cooperative’s value to the community.

Building an Effective Credit Union Executive Team

The agility and innovation of the C-suite is undoubtedly key to a strong transition, as well as continued growth as regulations change. As such, credit unions preparing for or undergoing bank acquisitions cannot put off the evaluation of their leadership team. Organizations must be equipped with executives who can optimize the experience for all stakeholders and maintain a 360-view of potential risks.

At AJ Consultants, our financial recruiters leverage predictive analytics to assess executive candidates. Our data-driven approach—along with our industry expertise—enables us to precisely identify senior leaders with rapid problem-solving skills, strong adaptability and responsiveness, and other critical traits. To further strengthen our evaluations, we collaborate closely with each client to ensure long-term hiring success—because we know rounding out your unique C-suite team is key to a successful bank acquisition.

Leverage our unrivaled expertise to strengthen your financial leadership team. Work with AJ Consultants to hire an exceptional credit union executive.