In Pursuit of Economies of Scope: Credit Unions’ Acquisitions of Banks and Thrifts

Abstract

Between 2012 and 2018, 19 credit unions acquired 23 banks and thrifts. 12 in 2017 and 2018; 17 are in process. Acquiring credit unions are pursuing economies of scope via traditional bank products. They are matched to and contrasted with peer credit unions that are not acquirers. Acquired institutions are matched and contrasted with peers that were not acquired. Performance is measured by CAMEL ratios. Acquiring credit unions have greater ROE and ROA, than nonacquirers, but are less liquid. Acquired institutions have lower capital adequacy, returns, and earnings than matches. Regulators should not discourage credit unions from economies of scope through acquisitions.