Overdraft Overhaul to Drive More Credit Union M&A in 2022

Much like U.S. bank M&A, the number of credit union mergers rebounded in 2021 following a pandemic-induced dip in activity in 2020.

Credit unions completed 168 deals in 2021, up from 139 in 2020 and 153 in 2019, and one credit union adviser said activity will not slow down in 2022.

"There was a bit of pent [up] demand after the pandemic and we'll see that continue," Glenn Christensen, founder, president and CEO of CEO Advisory Group, an M&A consulting company focused on the credit union industry, said in an interview. "There is a recognition that to truly be competitive going forward and be able to offer the technologies and such that are necessary, that they're better off partnering with a larger credit union to achieve the scale that they need."

Credit unions are increasingly looking to mergers for similar reasons that banks are, like gaining scale and offsetting multiple quarters of tepid loan growth, but the recent uptick in banks eliminating or drastically reducing non-sufficient fund and overdraft fees will likely drive even more credit union mergers this year, according to Christensen.

"That is a concern, particularly for small- and medium-sized credit unions that are heavily reliant upon the fee income that is generated from their checking accounts. And so as credit unions are looking to the future and it becomes increasingly more common to eliminate or reduce the NSF charges, how are they going to compensate from a fee income standpoint?" he said. "It's going to continue to drive mergers going forward."

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