By Anthony Hernandez
A recent article titled “The Community Bank Acquisition Machine” portrays credit unions as aggressive predators buying up community banks. As the leader of the Defense Credit Union Council (DCUC), I refuse to let that misinformation stand.
Let’s set the record straight: when credit unions acquire banks, it’s a voluntary, market-driven decision by both parties – not a hostile takeover. In each case, the community bank’s own board approves the sale, often choosing a credit union buyer as the best hope to keep local banking services alive. These sales are mutual agreements made for the benefit of customers and the community, not coerced conquests.
Critics absurdly paint credit unions as “predatory” for stepping in when a community bank owner wants to sell. There’s nothing predatory about saving a hometown branch from shutting its doors. In reality, many community banks face a stark choice: sell to a like-minded credit union that will continue serving the community, or sell to a larger bank that will likely close local branches. Credit unions have become lifeline buyers in such cases – ensuring a community isn’t left with a boarded-up building and no local financial partner. These acquisitions preserve access to financial services in towns that might otherwise become banking deserts. That is a public service, not a problem.
Member-Owned Mission Over Profits
Unlike profit-driven banks, credit unions are not-for-profit, member-owned cooperatives founded on a “people over profit” mission. We exist solely to serve our members – everyday people – especially those in underserved communities like rural areas and military bases. As member-owned institutions, credit unions reinvest their earnings into better rates, lower fees, and community services rather than padding shareholders’ dividends. This fundamental difference in structure is at the heart of why credit unions acquiring community banks is actually a boon for consumers. Every customer of an acquired bank becomes a member-owner of a credit union, gaining a voice in how their institution is run and benefitting from the cooperative model.
The article’s insinuation that credit unions harm the financial system ignores reality. In truth, credit unions often extend the legacy of community banks rather than erase it. We bring our “people helping people” ethos to new members, enhancing the customer service and community involvement that for-profit banks struggle to match. The results speak for themselves: when a credit union buys a bank, the local branch stays open and the employees usually stay on – often with better pay and benefits than before. Meanwhile, consumers gain access to a wider range of affordable financial products and services, from 30-year mortgages to financial counseling, that a small bank might not have offered. Far from being harmed, communities enjoy greater financial education outreach and charitable support after these mergers, as credit unions ramp up local initiatives and sponsorships.
Perspective: Big Banks Are The Real ‘Acquisition Machine’
If we’re going to talk about an “acquisition machine,” let’s point to the right place. Mega-banks have been ravenously consolidating the banking industry for decades, swallowing up local banks left and right. Since 2012, over $1.77 trillion in bank assets have been absorbed through bank mergers and acquisitions – and guess what? Credit unions accounted for a mere 0.3% of that total. In the same period, banks acquired other banks more than 2,000 times, while fewer than 40 deals involved a credit union as the buyer. The numbers don’t lie: credit union purchases of banks are a drop in the bucket compared to the wave of bank-on-bank takeovers. Community bankers sounding alarm bells are focusing on the exception, not the rule.
Let’s address the irony head on. Bank lobbyists decry credit unions for expanding modestly, yet the biggest threat to community banking has been the relentless consolidation by large banks. Those big-bank mergers often lead to branch closures, layoffs, and less competition – the real recipe for financial deserts and harm to the financial system. By contrast, when a credit union steps in to purchase a community bank, it usually prevents a financial desert by keeping the branch open and maintaining local jobs. Policymakers concerned about vibrant local banking should be far more worried about Wall Street megamergers and predatory lending practices than about a handful of cooperative credit unions that are actually preserving community access to fair financial services. Credit unions aren’t an engine of destruction in the financial ecosystem – we’re one of the few forces pushing back against it, one community-focused merger at a time.
Tax Status Misconceptions – Setting The Record Straight
Much of the criticism in that article hinges on our tax status, insinuating that credit unions’ tax exemption is an unfair advantage when acquiring banks. This argument is both tired and misleading. Yes, credit unions are exempt from federal income tax because of our not-for-profit, member-owned structure and public mission. Congress granted this status because credit unions channel earnings back to members and communities – a public benefit. Bankers lament the loss of tax revenue when a tax-paying bank becomes a tax-exempt credit union, but they conveniently ignore their own use of tax loopholes. Over 2,000 banks have elected Subchapter S corporation status to avoid corporate income tax, saving an estimated $1.8 billion in taxes in 2022 alone. In other words, a significant chunk of community banks already pay no corporate taxes – a fact bank lobbyists seldom mention while they hypocritically attack credit unions for a tax exemption established by law and purpose.
Moreover, unlike banks that distribute profits to a small circle of investors, credit unions use their earnings to build capital and deliver better value to ordinary members. That means any “tax advantage” directly benefits local consumers in the form of lower loan rates, higher savings returns, and investments in community programs. This is precisely the outcome Congress intended, and lawmakers have repeatedly affirmed the credit union tax status – most recently rejecting an attempt to tax large credit unions because they recognized that our cooperative model provides an irreplaceable public good. The bottom line on taxes is simple: credit unions earn their exemption by saving members money and serving community needs, all while still paying property taxes, payroll taxes, and other local taxes that support schools and services in the communities we serve. Rather than bemoan that credit unions don’t pay federal income tax, critics should acknowledge how that financial strength is returned to the community instead of being siphoned off to shareholders.
Serving Those Who Serve – The Defense Credit Union Difference
As president of DCUC, I am particularly proud of how credit unions support our military service members, veterans, and their families. The credit unions I represent provide tailored financial services to those who serve our nation. This is a mission banks cannot claim to the same extent. Credit unions on military bases often have to fill the void left by traditional banks, which may see military communities as less profitable. We offer products and counseling for the unique challenges of military life: irregular pay schedules, deployment and relocation expenses, and transitioning to civilian life. Defense credit unions routinely go above and beyond, from providing early pay for deployed troops to financial education programs that ensure military families are financially strong for life. We also actively shield servicemembers from predatory payday lenders lurking outside base gates – a pernicious threat to young soldiers – by offering fair loans and education, saving military personnel (and even the government) money in the long run.
This commitment to the military community is just one shining example of credit unions’ broader public service mission. When a credit union expands through an acquisition, it carries that ethos of service into new areas and to new consumers. Many of those community banks being acquired haven’t had the resources to offer robust financial education or special programs for low-income families – but credit unions do. Whether it’s a defense credit union helping a young enlisted member avoid a debt trap, or a community-based credit union expanding affordable services into a rural town, our focus is always on members’ financial well-being and the community’s prosperity.
Community-Building, Not Empire-Building
It’s time to drop the hysterics about credit unions “harming” the financial system. The truth is quite the opposite: when credit unions buy banks, communities win. These mergers keep local banking relationships intact and often deepen the community commitment by introducing the credit union’s cooperative values. They are done by mutual agreement, usually because the bank’s own leaders conclude that a credit union will be the best steward for their customers, employees, and community legacy. The tangible results are undeniable – branches stay open, employees keep their jobs (often with better pay), and consumers gain all the advantages of credit union membership: ownership, better rates, and service over profit. This is not a loss for communities by any stretch of imagination. It is a lifeline that ensures local families and businesses continue to have a neighborhood financial partner dedicated to their needs.
So, no, credit unions are not an “acquisition machine” rampaging through the financial sector. We are community builders and protectors, stepping up to preserve the spirit of local banking in an era when too many others have abandoned it. Every time a credit union saves a community bank, it strengthens that community – keeping ownership local, jobs in town, and financial services rooted in local values. That’s something we should be applauding, not criticizing. In a financial landscape increasingly dominated by faceless mega-institutions, credit unions provide a refreshing path forward by marrying cooperation with responsible growth. We will not apologize for fighting to sustain community banking traditions and expanding our member-first model to more Americans. Credit union-bank mergers aren’t about empire-building – they’re about community-building, and that is unequivocally a change for the better.
In the end, credit unions will continue to put people before profits, serve those who others overlook, and speak truth to power when false claims are leveled against us. Our members – including millions of service members and veterans – know the value we bring. It’s high time the detractors recognize it too. Communities, consumers, and service members all thrive when credit unions grow. We’ll keep fighting for them, no matter what naysayers publish.
Anthony Hernandez is CEO and President of the Defense Credit Union Council.