Community Bankers: Credit Unions Are Not Serious Threat

Survey by the state bank officials found that bankers are more worried about each other.

David Baumann


Oct 6



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David Baumann

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David Baumann

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Community bankers see their primary competition to be other community banks and not credit unions, according to the annual survey of the Conference of State Bank Supervisors.

From small business lending to small-dollar loans, community bankers reported that they do not see credit unions as a significant threat.

Worried About Other Banks

“In the face of considerable banking uncertainty in March and May 2023, it appears as though community banks may have experienced a retrenchment—more respondents reported other community banks as their primary competitor across seven of the nine product and service lines listed in the 2023 annual survey, and in much higher percentages than in recent years,” the CSBS reported.

And overall, the community bankers said that competition ranked near the bottom of external risks for banks; only 12% identified that risk as “extremely important,” down from 14% last year and 38% in 2021.

The survey appears to contradict the intense lobbying efforts on the part of a key banking trade group representing community banks that argues that the credit union tax exemption creates an unlevel playing field amid stiffening competition.

Credit Unions Not a Threat

The CSBS survey was distributed by state bank regulators from April to July; 462 community banks responded to it.

The CSBS also reported that:

--2.8% of respondents said that credit unions were their primary competition for payment services.

--28% of the bankers considered credit unions to be their primary competition in making small-dollar loans. That number has been decreasing, the CSBS said.

-- 4.9% of those responding said that credit unions were their most serious competition for small-business loans. “Community banks have, in prior years, lamented what they saw as increasing competition for small-business loans from credit unions,” the banking supervisors said. “However, in 2023, the percentage of community banks naming credit unions as their primary small-business loan competitors actually declined by nearly 2 percentage points.”

--11.7% of the bankers who responded to the survey identified credit unions as their main competition for one-to-four family mortgage loans.

--4.4% of the respondents said that credit unions were their most serious competition for commercial real estate loans.

-- Almost 93% of the bankers said cybersecurity was an “extremely important” or “very important” internal risk.

ICBA Sees Threat

While the community bankers viewed credit unions as a small threat, their trade group considers them a serious one—particularly when it comes to the acquisition of banks by credit unions.

“Only by constant diligence and active outreach can we ensure Washington wakes up to the credit union problem, recognizes that something is wrong, and ensures taxpayer funds aren’t used to underwrite financial services consolidation,” ICBA President/CEO Rebeca Romero wrote in an open letter to her members last month. 

And as credit union officials gathered for the NAFCU “Congressional Caucus” last month, the ICBA ran a series of ads targeting Capitol Hill urging lawmakers to question attendees “on the credit union industry’s founding mission, tax and regulatory exemptions, acquisitions of taxpaying community banks, and more.”


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