Revealed: The Impact of Credit Union Acquisitions

When a credit union buys a community bank on Main Street, the impact extends far beyond the balance sheet. Local entrepreneurs lose a champion, families lose a trusted source for mortgages and other key financial decisions, and communities risk losing the steady reinvestment that independent banks are known for. That concern is fueling debate as credit unions step up their acquisitions of community banks.

An ICBA analysis of recent publicly available data confirmed what many of its members have long said: Acquisitions by credit unions can have lasting, negative impacts on customers and communities. In affected markets where community banks participated in Small Business Administration programs, for example, small business lending through the SBA declined nearly 80% of the time. Mortgage lending also slipped, with median loan amounts dropping by roughly $20,000, limiting access to credit for many families.

The ripple effects

The impacts of these acquisitions are often most visible in lower-income areas where community banks have consistently delivered a large share of loans and financial services. 

Ken Hale, president and CEO of BOM Bank in Natchitoches, La., says that in these communities, the transition from a locally rooted bank to a tax-exempt credit union often means fewer dollars flowing back into the local economy and reduced support for entrepreneurs who depend on relationship lending to grow.  

Hale’s fifth-generation family-owned bank, which has 27 locations and $1.45 billion in assets, serves rural parishes across Louisiana and Texas. In those areas, the dollars community banks return often make the difference between a balanced budget and a shortfall. 

“In 2024 alone, we paid about $1.2 million into our local parishes,” Hale says. “That’s money for the sheriff’s department, school board, police and so forth, and it all stays right here.” He says that financial picture shifts when a credit union acquires a local bank and the dollars don’t flow back into the community the same way. 

BOM Bank also tracks thousands of employee volunteer hours annually, and as a certified community development financial institution (CDFI), it directs more than half of its lending to low- and moderate-income markets. 

“We operate six locations in towns where the population is under 1,000,” says Hale. “In some of those towns, we’re the only bank there.”

How credit unions outgrew their mission

Credit unions were created under the Federal Credit Union Act of 1934 to serve consumers of modest means with a common bond, often tied to a common employer or community group. That profile has shifted over the past 25 years, and ICBA believes credit unions have expanded beyond their original mission of serving those small groups of members. 

Regulatory changes—such as the National Credit Union Administration’s 2017 field of membership rule change, which allowed credit unions to relax their membership requirements—have allowed credit unions to buy community banks, merge across state lines and grow into multibillion-dollar institutions. All the while, they have remained tax-exempt and not subject to Community Reinvestment Act (CRA) requirements. 

Since 2010, credit unions have acquired 77 community bank charters, with more than 60% of those deals happening in just the past five years. Over 80% involved credit unions with more than $1 billion in assets, and about 40% were buyers from out of state. 

Nearly two-thirds of the banks acquired were healthy and profitable at the time, underscoring how tax-exempt credit unions often target strong institutions rather than struggling ones.

As these acquisitions continue, ICBA’s analysis reinforces what customers and communities already know: Community banks are more than financial institutions. They’re anchors of opportunity, and their presence or absence shapes the future of local economies. They show up at school fundraisers, sponsor local events, advise first-time business owners and keep decision-making close to the communities they serve.

According to ICBA’s analysis, community banks have provided 69.3% of all SBA loan dollars since 2010, compared with just 2.8% from credit unions. In the nation’s highest-poverty counties, community banks delivered more than 76.5% of SBA loans, supporting growth where it’s needed most. 

In a September blog post, ICBA president and CEO Rebeca Romero Rainey said, “Community bank small business lending in low-income areas is in a league of its own, and credit union acquisitions pose a significant threat to the communities that depend on this economic lifeline.” 

Community banks push back with proof

With tax-exempt credit unions buying up healthy institutions, expanding beyond their original purpose and reshaping local markets in ways that leave small businesses and families with fewer options, credit union acquisitions have become an increasingly prominent factor in the debate over the credit union tax exemption. 

Now, ICBA’s analysis of publicly available federal data is confirming community banker concerns with the trend.

“ICBA’s new data gives us the proof points we need,” says Michael Emancipator, ICBA senior vice president and regulatory counsel. “It takes this issue out of the realm of rhetoric and shows policymakers there is tangible harm when these deals occur.”

The numbers also reaffirm the difference community banks make in the regions they serve. With a presence in 97% of U.S. counties, including nearly every rural and low- to moderate-income market, independent banks are the lenders that show up when others don’t. 

“There’s no substitute for the presence of community banks in America,” Emancipator says. “They’re in places where other institutions aren’t, and they remain deeply committed to those communities.”

One of those anchor institutions is $930 million-asset Potomac Bank (previously Bank of Charles Town) in Charles Town, West Virginia. Alice P. Frazier, president and CEO, says despite West Virginia’s high concentration of credit unions, she hasn’t faced a credit union in her own market. Still, she has watched the trend closely and seen its effects on other communities. 

“When those acquisitions involve out-of-state credit unions, lending often slows and local support fades, because the institution is no longer fully embedded in the community,” Frazier says. 

That absence surfaces in ways that may not appear in balance sheets but matter deeply to local residents. From sponsoring Little League parks to backing food banks, community banks consistently direct time, talent and resources into the neighborhoods they serve. “That’s what community banks do so well,” she adds. “It’s part of who we are, and you see it in story after story across the country.”

Frazier points to the progress community bankers have made on this issue by proactively working through their state associations and engaging legislators. A recent law blocked future credit union acquisitions in West Virginia, for example, while Illinois, Michigan and other states are building similar momentum. 

“For years, lawmakers in Washington brushed off conversations about credit unions,” she says. “Now, the more consistently we raise awareness and keep the issue in front of them, the more seriously they take it.”

A lifeline in hard times

Community Spirit Bank in Red Bay, Alabama, serves communities across northeast Mississippi and northwest Alabama. Brad M. Bolton, president and CEO of the $215 million-asset bank, emphasizes the vital role community banks play in supporting areas that depend on small business and agriculture lending. 

Nationwide, community banks provide 60% of the nation’s small business loans and 80% of the U.S. banking industry’s agricultural loans. When one community bank is acquired by a credit union, financial support for local enterprises often goes away with it. 

Community banks’ outsized role in their regions was especially clear during the pandemic. Like many others, Community Spirit Bank helped deliver Paycheck Protection Program (PPP) loans to small businesses and sole proprietors that might otherwise have been left out. Across the country, community banks made 60% of PPP loans and an even greater share of 80% to minority-owned businesses and self-employed borrowers. 

“Look no further than the pandemic to see why our banks matter,” says Bolton. “Community banks were the ones getting relief to the smallest businesses and most vulnerable borrowers when it counted.” 

Looking ahead, he stresses the importance of grassroots advocacy at the state level to preserve those roles. “This battle has to be won at the state level,” Bolton says. “If we want to preserve the role of community banks, we have to work together to limit these transactions and protect the future of local lending.”

The conversation about credit union acquisitions ultimately comes down to community impact. Community banks aren’t just financial institutions; they’re neighbors, employers and local partners. 

At BOM Bank, that commitment takes shape in tangible ways: thousands of employee volunteer hours each year, more than $1 million in donations and sponsorships, and lending programs designed for first-time buyers and underbanked households. 

Hale has also taken his message public, publishing three op-eds, one with Bolton, that sparked strong reactions and brought new attention to the issue at hand. “People told me they hadn’t realized the difference [between a community bank and a credit union] until they read it,” he says. “That kind of awareness is what keeps our story moving forward.”

For those community banks looking to sell, Hale stresses the importance of considering more than the offer from the highest bidder. 

“I realize some families may be ready to sell,” he says, “but hopefully they’ll also pause and consider what their community stands to lose if ownership shifts away from a true community bank.”

Bolton highlights the competitive disadvantage community banks face when it comes to acquisitions. Because credit unions don’t pay federal taxes, they can make purchase offers based on pre-tax earnings, while banks must account for tax obligations before bidding. That difference often tilts the playing field.

Advocacy is everything

This is yet another reminder of why advocacy at the state level is so important. Leveling the rules, Bolton points out, ensures that decisions about who owns a community bank aren’t made by outside buyers with advantages that don’t reflect the realities of serving local businesses and families. 

“If my bank earns $3 million a year and pays $500,000 in taxes, a competing bank has to calculate the deal on the lower net,” Bolton says. “A credit union, on the other hand, can base its offer on the full $3 million, which means they can almost always outbid us.”

As the issue gains momentum, Frazier stresses that persistence is paying off. Years of advocacy, paired with new ICBA data, have put community bankers closer than ever to meaningful change. 

“For my entire career, we have talked about credit unions and how they’ve been on an overreach beyond what was originally intended for them,” she says. “Years of steady advocacy, reinforced by compelling new ICBA data, have brought us to this moment. Our time is now.”

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