Mergers provide the resources and scale necessary for merged credit unions to invest in modern governance and use of their data, and to build and maintain the models necessary to inform decision-making. Similarly, the ability to deliver secure, speedy, digital and multi-channel service requires a certain scale to operate efficiently. Far from reducing the credit union trademark of quality member service, providing more, varied and faster mechanisms for service delivery better meets members' needs and expectations. This work is advanced when credit unions join hands and forces, and use their combined strength, intellect and innovation to enhance the experiences and security of both original membership populations.

Mergers that provide credit union members with these benefits of scale are then able to use that advantage to improve the pricing they can provide members, as well as create greater capital per member, increasing the safety and soundness of the industry. Ultimately, credit unions better able to respond to member needs in these areas will grow, delivering the vibrancy of new members to the movement. During a series of PenFed mergers, our assets grew by $15 billion – with only $3 billion of that coming through the mergers themselves. Uniting with other credit unions allowed us to serve all our members – new and old – better than ever before.

PenFed has also retained and grown the membership of the credit union communities with which it has merged. In 2006, PenFed merged with a 20,000-member credit union with one branch and less than $100 million in assets in Puerto Rico. Today, that operation has grown to almost $5 billion in deposits, supporting over 300,000 members with five branches and nearly 150 employees. Not all merger partnerships have been as successful as Fort Buchanan Federal Credit Union, but all have been extremely beneficial to the membership, the institution, the employees and the communities in which we serve.

This is why credit union members have repeatedly voted to merge. Credit union mergers aren't driven by CEOs looking to grow, even if that is an entirely supportable and rational desire of forward-looking CEOs. In fact, credit union CEOs don't have the authority to choose to merge. Members themselves participate in a democratic process initiated by the boards of both credit unions, requiring the support of a majority of voting members from the acquired institution, and member-supported mergers are then approved by the NCUA. This process ensures that the members, the boards and the industry regulators must all support a merger for it to take place. Members approve mergers when they perceive themselves to be better served by the merged organization than their existing organization. The democratic nature of this process is a bedrock principle for credit unions and ensures they can never become pawns of an individual or uninformed pundits who don't have all the information that the board members do.

Credit union members will always seek the institution – whether bank or credit union – that best meets their individual needs. Clearly, many members believe that supporting strategic mergers with other credit unions is the best way to ensure their financial stability and well-being. Experience has proven they are right, and the numbers and trends are a clear indicator of an industry that will continue to consolidate forces to best serve its members. The recent merger announcement of First Tech Federal Credit Union and Digital Federal Credit Union is just the tip of the iceberg. The numbers and asset sizes of merging credit unions will continue to accelerate in the years ahead.

Credit union members and their boards are smart and capable – together they will continue to make decisions that are best for their organizations.

James Schenck

James R. Schenck is President/CEO of the $33.5 billion, McLean, Va.-based PenFed Credit Union, America's second-largest federal credit union serving nearly three million members worldwide.