Two upstate New York credit unions plan to merge and, in the process, form a top-30 institution by asset size. Industry experts say more large deals could be on the way.
The $2.6 billion-asset Capital Communications Federal Credit Union in Albany, New York, and the $5.4 billion-asset State Employees Federal Credit Union, also based in Albany, said in a press release Thursday that both boards approved the proposed merger July 28. The organizations expect to be fully integrated next year.
The merger will give the new $8 billion-asset credit union the scale necessary to create greater opportunities for its employees as well as significant advancements in products, services and support for members and community partners, the companies said.
This merger will create the largest financial institution in New York’s Capital Region based on local deposits and one of the five largest credit unions in the state.
The need for increased size to remain competitive is driving larger deals across the industry, said Dennis Dollar, a credit union consultant and former chairman of the National Credit Union Administration.
“As has been driving bank acquisitions for years, the need for increased scale is driving credit union mergers, and we expect this trend to not only grow, but the size of credit unions merging will grow as well,” he said.
Dollar said his firm is now working in some capacity on 36 mergers, and a handful of them involve two credit unions that both have more than $1 billion of assets.
Many credit unions recognize the need for scale necessary to be both more efficient and more competitive in a market dominated by the 100 largest banks, which now hold about 80% of all deposits in federally insured financial institutions, Dollar said.
“This is a trend that is almost certain to continue because the realities of today’s marketplace require growth and scale more than ever before,” he said.
In 2019, there were five deals closed in which the smaller credit union had assets of more than $400 million — a milestone that had never been reached before, said Peter Duffy, an analyst for Piper Sandler.
The pace has remained steady. In the past two years there have been more than 10 deals announced or closed where the merged credit union had assets topping $400 million, he said.
Piper Sandler is now involved in half a dozen discussions with large credit unions about mergers because boards are increasingly understanding the critical need for economies of scale, he said.
“Members are driving the trends through their demand for more and better technology, but with no letup on the expectation for low loan rates and high share rates,” he said. “I have 10 board meetings over the summer and early fall to discuss the trends impacting the need for scale.”
The cost of technology is a big driver behind that need to scale up, he said.
Capital Communications, which does business as CAP COM FCU, has completed three other mergers since September 2019, including a deal with
The credit union serves more than 140,000 members across 12 branch locations.
“This represents an exciting possibility to continue to expand our award-winning service to members across New York State, while continuing to invest in technology that makes banking more convenient,” CAP COM President and CEO Chris McKenna said in the press release about the latest deal.
State Employees Federal Credit Union, which operates as SEFCU, has more than 350,000 members and more than 50 branches.
President and CEO Michael Castellana said the two credit unions share similar values, culture and commitment to community.
“We are also excited about advancing our purpose-driven mission in new and exciting ways from expanding and enhancing our products, services and support for our members, to offering deeper, more meaningful financial and volunteer contributions to nonprofit organizations,” he said in the release.
