As credit unions branch out with bank buys, what’s the impact for the Chicago region?

You may have glimpsed the rebranding while driving by.

One day, it’s a local bank. The next day, a new sign displays a credit union logo.

Your eyes aren’t deceiving you. Credit union mergers with banks are trending up in the U.S., experts say.

In 2021, federal and state-chartered credit unions acquired eight banks, according to the National Credit Union Administration. That spiked to 13 in 2022.

Suburbanites need look no further than GreenState Credit Union’s merger with Oak Brook-based Oxford Bank & Trust in 2022.

“There was a great alignment in our core values,” said Jim Kelly, chief marketing officer for GreenState, headquartered in Iowa. “Oxford took very good care of their stakeholders, meaning their staff, customers, and communities. We knew that our combined strength would be even more beneficial to those stakeholders. We also had several thousand Green State members already living in Chicagoland, so these preexisting members now have access to a few branch locations.”

Credit unions have existed for centuries, starting in Europe.

“Their original roots were trying to help ‘the little man,’” explained economist Robert Chirinko, a University of Illinois at Chicago finance professor.

The first U.S. credit union opened in 1909 and the institutions proliferated, providing popular options for employee organizations. Credit unions were granted tax-exempt status in 1951.

While big banks catered to corporate customers, credit unions offered personalized service to individuals seeking personal loans and mortgages.

Come the 2020s, credit unions are benefiting by acquiring smaller banks. Mergers increase risk diversification and pool resources for expenses, such as software updates, Chirinko said.

Momentum in the Midwest

Michigan State University Federal Credit Union has eyed the Chicago region for several years and now is awaiting federal approval of its acquiring Algonquin State Bank and McHenry Savings Bank.

“Chicago is known as a Midwestern hub for Michigan State University graduates and alumni from other Michigan colleges,” Executive Communication and Legislative Affairs VP Allison Horn said.

“MSUFCU has over 4,800 current members and 18,000 Spartan alumni living in the Chicagoland area. Members in this region already have significant loan and deposit balances with the credit union,” she said. “Adding physical branch locations will enhance our service to these members.”

And “by growing the credit union through new membership, MSUFCU is able to enhance its investment in technology, physical locations, new products and services, expand community involvement and increase philanthropic efforts,” she said.

Corporate officials are collaborating to give customers a smooth transition, Horn added.

GreenState’s Jim Kelly notes “there are a lot of moving parts when bringing together two financial institutions, especially when they operate on different core processing systems. But the transition with Oxford went very well and there was little-to-no interruption in service.

“One way to measure the success after an acquisition is to see if the growth in the market continues, particularly with things like number of customers, deposit balances, and transactions counts. Since Oxford became GreenState we have experienced double-digit growth in all of those areas,” he said.

Green State also acquired Midwest Community Bank in 2022.

“This too has gone well for us and we are seeing good growth in those new branches as well,” Kelly said.

MSUFCU’s Horn noted that “Chicago has a presence from all the national banks but little credit union representation.

“Not having a credit union presence has created a gap in financial education, community involvement and philanthropy,” she said.

Unwanted attention?

Currently, “credit unions are getting bigger and bigger, they’re merging and they’re starting to look more and more like banks, (although) they’ll never be as big as JPMorgan Chase,” UIC’s Chirinko noted.

That evolution could attract unwanted attention, he said.

“If you think about yourself as a mid-sized bank, now you have to compete against a mid-sized credit union. It’s not a fair fight, the credit union has that tax-free status,” he said.

That could mean “the banking lobby — which is not a group I would want to deal with if I was a politician — the banking lobby is going to say, ‘withdraw the tax free status,’” Chirinko said.