The irresistible forces that would drive credit union consolidation are often thwarted by the immovable object of self-preservation. This paradox may be the No. 1 strategic issue for most growth-minded credit unions that recognize the need for scale.

Credit unions of all sizes that lack accountability and motivation often live off the capital built over years of member loyalty, even though those members would benefit, through better rates and enhanced services, from a combination with a stronger credit union. Absent the growth and greater efficiencies resulting from merger activity, top performing credit unions are vulnerable to seeing their competitiveness deteriorate as banks add scale through both organic growth and consolidation.

The fact that capital is allowed to erode at some credit unions, while top performers seek access to additional capital, is a real irony. No one benefits from this irony, including potential acquisition targets whose best bargaining position comes from elevated capital levels.

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