Prominent Northwest Credit Unions Plan Merger

The merger follows a greater national trend of consolidation among financial institutions.

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Last week, Eugene-based Northwest Community Credit Union and Washington-based TwinStar Credit Union announced plans to merge. If the merger goes through, the credit union’s combined assets would total $4 billion, with 700 employees, and over 245,000 members throughout Oregon and Washington.

The announcement follows a wider trend of consolidating financial institutions. TwinStar would become the second Washington credit union this year to merge with an out-of-state credit union this year. In June, members of the $612 million Global Credit Union in Spokane approved a consolidation plan with the $10.8 billion Alaska USA Federal Credit Union in Anchorage, Alaska.

Last year, Tacoma-based Columbia Banking System Inc. announced plans to consolidate with Portland-based Umpqua Holdings Corporation.

The merger is expected to complete in 2023 or 2024. The two credit unions will keep their names for now, but plan to share a to-be-determined name after the consolidation.

Credit union mergers have increased significantly over the past year. The National Credit Union Association (NCUA) approved 41 consolidations during the first quarter of 2022, according to the federal agency’s Q1 Merger Activity and Insurance Report — More than the 33 approved mergers during first quarter of 2021.

Of the 41 mergers, 34 received the NCUA’s approval to consolidate in order to expand services. Two credit unions cited poor financial condition, two merged due to inability to obtain officials, two for lack of sponsorship, and one for declining membership.

Jeff Kennedy, chief executive of TwinStar, said that the reasons for the merger were manyfold.

“It goes beyond just one reason. It’s because we would gain economies of scale; it’s because we’d grow to 36 branches across two states; it’s because with that growth comes more opportunity,” Kennedy said in a prepared statement.

According to the announcement, Kennedy would be the CEO of the new organization and Northwest Community Credit Union’s president and CEO John Iglesias would be the president.

In a prepared statement, Iglesias said the boards of both credit unions were “100% aligned” in their vision for the future.

There is reason to believe more mergers like this one could be on the horizon. Smaller financial institutions that provide personalized service can survive by keeping costs down while working with a small pool of high-value clients.

In a statemnt to Oregon Business, GoWest Credit Union Association President & CEO Troy Stang said the union of the two credit unions will help both orgnizations compete. 

“As credit unions are not-for-profit cooperatives owned by their members, decisions are ultimately made to benefit them,” says Stang. “If the boards and leadership of two financially strong credit unions determine a merger is in the members’ best interests, they are leveraging their abilities to offer even more to their members. This can be in the form of more branch locations, investment in technology, and increased staffing expertise to meet members’ needs.”

Large financial institutions have more regulatory oversight and cost of compliance, but can use larger profit margins to deploy technological efficiencies and serve a broad customer base. Mid-size, regional banks get the short end of both sticks, having higher cost of compliance and the ability to serve fewer customers.

If the trends identified by the NCUA prove to be in the best interest of mid-size banks and credit unions, consolidation to service more clients might make even financial sense to more institutions as time goes on.

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