Last month, a handful of credit unions and banks with a presence here announced two mergers and completed another. It’s part of a pattern of increasing consolidation in both the credit union and banking industries, some industry leaders here say.

On Oct. 1, Liberty Lake-based STCU completed its acquisition of Creston, Washington-based Coulee Dam Federal Credit Union. On Oct. 12, Tacoma, Washington-based Columbia Banking System Inc. announced a merger with Portland-based Umpqua Holdings Corp. On Oct. 15, Anchorage, Alaska-based Alaska USA Federal Credit Union announced it would merge with Spokane-based Global Credit Union.

Grant Forsyth, chief economist at Spokane-based Avista Corp., says such transactions are part of a larger trend.

“The trends we’re seeing here in the region are national trends,” Forsyth says. “This is part of a broader consolidation in the finance industry. You’re going to have fewer institutions with more market share.”

Other financial institutions with a Spokane-area presence have been part of merger-and-acquisition activity in recent years. They include Coeur d’Alene-based Mountain West Bank’s parent company’s acquisition of American Fork, Utah-based Altabancorp last month; Richland, Washington-based Gesa Credit Union’s acquisition of Seattle-based Inspirus Credit Union in August 2019; and the August 2018 acquisition of Spokane-based Inland Northwest Bank by Billings, Montana-based First Interstate Bank.

Ezra Eckhardt, president and CEO of STCU, says the credit union has been involved in more acquisitions in recent years than it had been for more than a decade.

Eckhardt says the Coulee Dam Federal acquisition represents the credit union’s fourth acquisition since August 2019.

“STCU had three bank or credit union mergers prior to that, but the last of those had been maybe 17 years before,” Eckhardt says.

Opportunities for acquisitions have occurred more frequently in recent years, he says.

“The growth in total deposits in the marketplace has put a little bit of pressure on the capital position of many of the credit unions,” Eckhardt says. In other words, financial institutions have been inundated with liquid assets due to lack of spending and government stimulus measures during the COVID-19 pandemic, which puts their asset ratios at risk.

As reported by the Credit Union Times, there are about 5,100 credit unions in the U.S., down from some 15,000 credit unions in the mid-1980s. On average, there have been 170 mergers per year since 2016. With 70 credit union mergers in the first half of 2021, this year could fall short of the average.

Forsyth says that for credit unions in particular, competition has been heating up in recent years.

“There’s a lot of competition and a lot of pressure for smaller credit unions to merge with larger ones, just in terms of the ability to continue to provide services to their customers,” Forsyth says. “We’ve seen that in the traditional banking sector for a long time. You have competitive pressures where it’s harder and harder for smaller institutions to compete.”

Charlotte Nemec, president and CEO of Canopy Credit Union, says watching credit unions be acquired is daunting for small credit unions such as Canopy, which has about $181 million in total assets.

“I heard the news … about Alaska USA and Global, and I just thought, how is this going to work for us? The bigs just keep getting bigger,” Nemec says.

After Global Credit Union merges with Alaska USA, there will be six credit unions in the Spokane area that have more than $1 billion in total assets, Nemec says. In addition to Global, that list includes STCU; Numerica Credit Union; Horizon Credit Union; Tukwila-based BECU; Washington State Employees Credit Union, headquartered in Olympia; and Lewiston, Idaho-based Potlatch No. 1 Federal Credit Union. 

“It’s hard, because we don’t have the economy of scale,” Nemec says. “Everything from our vendor relationships to what we pay our employees hits our bottom line a lot harder than it hits the big boys.”

Forsyth says smaller credit unions often struggle if they try to offer more services in an attempt to remain competitive.

“The problem is, for some of the smaller credit unions, trying to broaden services increases costs in a way that may be difficult to maintain,” Forsyth says.

Forsyth says smaller financial institutions that serve rural communities may also find the costs of serving such communities unsustainable.

“At least in Eastern Washington, some of these smaller communities aren’t growing much,” Forsyth says. “That may be another pressure for smaller credit unions serving rural areas to look for a larger partner.”

Eckhardt says most of STCU’s 156,000-plus members are in Spokane County and Kootenai County.

“We’ve looked for opportunities to expand that presence outside of the two-county space,” Eckhardt says. “We’re looking to create a more scalable network across Eastern Washington and North Idaho.”

Smaller institutions that capture a solid foothold in their market risk attracting the attention of larger, acquisition-hungry banks.

“If you’re very successful, then you become an attractive acquisition for a larger bank, and at that point, it’s pretty hard for the shareholders of the small, successful bank to say no to a good acquisition price,” Forsyth says.

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