Hiring Versus Acquiring: How CUs Can Best Scale in Today's Landscape

Many credit unions have decided that now is the best time to expand by hiring new talent rather than acquiring another credit union or bank. Recruiting can be used to expand existing operations, enter a new market or create a new line of business.

This trend is evident in the credit union industry’s frequent announcements of promotions, appointments, and hires. IC Federal Credit Union in Fitchburg, Mass., recently hired former Avidia Bank executive CarrieAnne Cormier as its next COO. Citadel Credit Union in Exton, Pa., successfully recruited a team of bankers from Santander Bank to launch a business banking division.

The acceleration of executive recruiting correlates with an overall stagnation in merger activity. The NCUA approved 76 mergers in the first half of 2022, representing a nominal increase from a year earlier. Excluding the pandemic-impacted numbers for 2020, the banking industry is on a pace to have its lowest annual M&A volume in a decade.

Various factors are impacting the current M&A landscape. President Biden’s executive order requiring federal agencies to review their approval processes has increased concerns about enhanced regulatory scrutiny.

Rising interest rates could also factor into merger decisions. The Fed has aggressively increased rates in the last few months, which could give potential sellers more confidence that they can increase profits and stay independent for longer.

Why Hiring Is a Good Option

Recruiting is being prioritized now for institutions for a variety of reasons. The beauty of hiring instead of acquiring is that credit unions can avoid employee attrition. They can also take advantage of an opportunity to enter new markets or add products and services with a clean balance sheet rather than inheriting potential credit issues from an acquired institution.

Technological advances have also made it significantly easier for credit unions to launch national lending platforms or to accommodate employees who prefer to work remotely. It also makes it easier to interview and vet potential candidates.

Also, the process of mergers and acquisitions, from start to finish, can take months to complete. The median time for closing bank deals announced since 2020 is 145 days, according to data recently compiled by S&P Global Market Intelligence.

New executives and lenders can typically start within weeks, helping credit unions quickly gain members and bring in new business. Positions in high demand, such as relationship managers and lenders, are becoming easier to fill, as those employees become increasingly open to switching employers.

At the same time, the boards of acquisition targets can be obstinate about the terms of a deal, often wanting more concessions than what a buyer is willing to accommodate; this can make recruiting talent more cost-effective than a merger with another institution.

Hiring Best Practices

As more credit unions consider adding a new lender or executive, they need to consider several factors. First, the employee they are recruiting needs to be clear from any non-compete or non-solicitation agreement that could lead to litigation from the lender that they are leaving. They must also understand the credit union’s strategy and fit in well with the underlying culture.

Lastly, for positions such as lenders, credit unions need to ensure that their vetting process for borrowers is consistent with the institution’s standards.

Many large mergers are on track to close soon, making it likely more bankers will be looking to make career changes soon. This will create the ability for credit unions to hire more talent and continue to scale in today’s marketplace successfully.

It is critical for credit unions to continuously brush up on their vetting processes, engage existing employees to provide referrals and understand how to communicate their strategies and culture to prospects. A robust pipeline of potential hires, combined with cohesive hiring protocols, can help credit unions take full advantage of opportunities when they become apparent.

Paul Davis is Director of Market Intelligence for Strategic Resource Management (SRM), a Memphis, Tenn.-based independent advisory firm serving financial institutions.