Who Benefits When CUs Merge?

A paper by Bauer, Miles, and Nishikawa found gains to the owners/members of the target credit union and to the regulators but not to the acquiring credit union.

The paper examines pre-merger versus post-merger performance of credit unions between between 1995 and 2003. The study treats all mergers as the same whether the merger is between willing partners or a purchase and assumption agreement (P&A) between the acquiring credit union and the National Credit Union Share Insurance Fund (NCUSIF). The paper notes that less than 10 percent of the mergers involved P&As with the NCUSIF.

The paper found that members of the target credit union experienced a net gain from the merger.

The study also found that the performance of acquiring credit unions is little affected by the merger. If an acquiring credit union makes some financial adjustments to a merger, these changes tend to favor borrowers at the expense of savers.

Furthermore, the study found evidence to support the hypothesis that most mergers are instigated by regulators to avert using NCUSIF to resolve failing credit unions. The authors posit that the acquiring credit union may do the merger to avoid any disutility to its members that may arise from impact of the failed credit union on the NCUSIF.

Read the paper.