LAKE TAPPS, Wash.—What’s fueling credit union bank acquisitions this year, and where are the pressure points that could slow the pace?
Glenn Christensen, founder and presidentof CEO Advisory Group, shared his outlook on the strengths behind these deals and the challenges that could shape the rest of 2025.
“Credit unions are staying active in the bank acquisition game, and we're expecting deal numbers to match last year by the time 2025 wraps up,” he told CUToday.info. “With several transactions still working their way through the pipeline, it's a good time to look at what's driving this activity and what might slow it down.”
To be “realistic” about who can pull off a bank acquisition, Christensen contended these deals require serious financial muscle.
“Which means we're mostly talking about credit unions with over $1 billion in assets,” he said. “The good news? That club keeps growing. We now have 449 credit unions that size, and they generally have the scale and know-how to handle complex deals.”
That said, smaller credit unions can still become buyers if their financials are rock-solid, Christensen said.
“Take $687 million Frontier Credit Union's announced purchase of First Citizens Bank of Butte. At $75 million, it's not a massive deal, but it shows that smaller players with strong capital can still find opportunities,” he explained. “But here's where the story gets really interesting.”
Strong Capital Levels
Christensen said large credit unions are sitting on more capital than they've had in years. As of June 2025, credit unions with over $1 billion in assets averaged an 11.18% net worth ratio, the strongest seen since 2019.
“Even better, it's not just a few well-capitalized institutions driving that average up. More than 65% of large credit unions now have net worth ratios above 10%, compared to just 49% in 2020. We're back to levels we haven't seen since 2015, which tells us this is a broad-based improvement across the industry,” Christensen said. “Why does this matter for bank deals? Because buying a bank hits your net worth ratio hard. You need that capital cushion going in, or you'll find yourself in regulatory hot water pretty quickly.”
The Other Side Of The Story
Earnings, however, are another story, Christensen asserted.
“Here's where things get concerning. While capital levels look fantastic, earnings have been under real pressure,” Christensen noted. “Return on assets dropped to 0.6% for large credit unions in 2024, and we're only seeing modest improvement so far in 2025 (see chart below).”
Back in 2015, less than 1% of large credit unions had negative earnings. In 2024? That number jumped to 8%—the worst seen in a decade.
“Things improved slightly in early 2025 (down to 4%), but we're still way above historical norms,” Christensen explained. “With the exception of 2021 sub-standard earnings have steadily increased. Nearly a quarter (22%) of large credit unions had ROAA below 0.25% in 2024. In comparison, less than 4% had sub-standard earnings in 2015.”
What This Means For Deal Making
“I think the earnings squeeze over the past couple of years has definitely made some credit unions pump the brakes on acquisitions,” Christensen said. “And, honestly, that makes sense. If you're struggling to generate profits from your existing operations, taking on a complex bank integration probably isn't the smartest move. But here's the thing: Those strong capital positions aren't going anywhere. Credit unions that have built up substantial net worth ratios have created a foundation for growth that should serve them well as conditions improve.”
The Road Ahead
Despite the earnings headwinds, credit unions are well-positioned to stay active in bank M&A, Christensen said, adding the combination of strong capital, growing experience with these deals, and an expanding pool of potential buyers creates a solid foundation for continued activity.
If a credit union is thinking about bank acquisitions, according to Christensen, here's what really matters:
- A high net worth ratio provides a strategic advantage —Build a net worth buffer to seize strategic opportunities
- Make sure you're profitable first—Don't try to buy your way out of earnings problems
- Build the right team—Bank deals require different skills than credit union mergers
- Know your market—Pick targets that actually fit your strategy
“The bottom line? Credit unions have the capital strength to keep playing in this space. As the earnings picture improves and rate pressures ease, we should see continued appetite for bank acquisitions from well-positioned credit unions,” Christensen concluded.