Idaho credit union plans to extend its operations into Montana through a bank acquisition.
In the ever-evolving world of retail financial services, 2025 is witnessing a significant shift as credit unions are actively acquiring banks and merging with other credit unions. This trend, driven by increasing regulatory burdens and competitive pressures, is reshaping the industry landscape.
Frontier Credit Union, with roots in Dillon, recently announced its acquisition of First Citizens Bank of Butte. This move will add $75 million in assets to Frontier's footprint, marking its first expansion into Montana. Dan Thurman, Frontier's CEO, expressed his excitement about serving his home state. Similarly, Casey Reilly, CEO of First Citizens Bank, expressed enthusiasm about their customers being served by a credit union that understands Montana and shares its values.
The acquisition also grants First Citizens Bank access to expanded product offerings, including advanced digital banking tools and quick online loan applications. Despite the transaction, Frontier does not anticipate significant staffing changes.
This is the sixth whole-bank purchase by a credit union this year, following a record 22 acquisitions proposed in 2024. However, it's important to note that the combined entity will expand to 16 locations after the acquisition, as opposed to the early March trend seen last year.
Credit union leaders like Isaac Johnson, CEO of TDECU, emphasise the necessity of acquisitions and mergers for credit unions aiming to become among the top nationally, given the costs and complexities involved in organic growth. Five Star Credit Union, for example, has significantly expanded in assets and branches by absorbing smaller community banks over the years.
The consolidation trend may result in fewer, larger credit unions dominating regional markets, increasing competition for traditional banks. This could push banks to innovate more aggressively or seek new partnerships themselves. As credit unions grow larger and more complex, regulators may revisit rules governing the distinctions between banks and credit unions, potentially affecting how both operate.
The Independent Community Bankers of America (ICBA) has expressed criticism towards credit unions' tax exemption, arguing it allows them to offer a higher purchase price for small or struggling banks. The ICBA's CEO, Rebeca Romero Rainey, has called for policymaker action regarding the increasing criticism of credit union tax and regulatory exemptions.
Salem, Oregon-based Maps Credit Union said it would acquire Oregon City-based Lewis & Clark Bank a week earlier, adding a single branch to its existing 15 locations. The transaction is set to close by the end of 2025.
In conclusion, the credit union sector appears to be at a tipping point in 2025, leveraging acquisitions to scale rapidly. This will likely reshape competitive dynamics in retail financial services, challenging traditional banks to respond either through innovation or consolidation.
Business growth in the banking-and-insurance industry is not limited to traditional banks, as credit unions like Frontier are actively acquiring banks and merging with other credit unions to expand their footprint, such as Frontier's recent acquisition of First Citizens Bank in Montana. finance leaders, such as TDECU's Isaac Johnson, believe that acquisitions are essential for credit unions aiming to compete on a national level due to the costs and complexities involved in organic growth. This trend of consolidation could result in larger credit unions dominating regional markets, potentially pushing traditional banks to innovate more aggressively or seek new partnerships.
