Massachusetts CUs Want Share of Bank M&A
CUs Say They’re Good Fit for Small Banks. Bank Groups Say Otherwise
By Sam Lattof | Banker & Tradesman Staff
When Hanscom Federal Credit Union bought a Maryland bank last month, it did something that’s illegal for its state-chartered peers. Efforts to change that have met stiff resistance from bank leaders.
Massachusetts law says state-chartered credit unions cannot acquire banks and be the surviving entity. If a credit union was to acquire or merge with a bank, it would have to become a banking institution.
But with regulatory burdens and competition rising, many smaller banks eventually face a choice: sell themselves to a larger competitor, or join a mutual holding company if they qualify. Credit union executives think their sector can offer a third path.
“A lot of community banks in certain markets aren’t exactly attractive for the big players,” Hanscom FCU President and CEO Peter Rice said. “They don’t have much interest in buying a small community bank in Maryland, and it’s the same for a lot of the regional players there. The economies of scale just aren’t there in the deal. So, then you’ve got a community saying, ‘Well, is there anybody else we can partner with?’ And that might be another community credit union.”
Credit Unions’ Capital Advantage
Elsewhere in the country, credit unions have been able to outbid banks in these deals, something bank executives fear could happen here if the law was changed.
Credit unions have an ability to store up capital, said Hometown Financial Group CEO Matthew Sosik, whose mutual bank holding company has been one of the most frequent absorbers of community banks in Eastern and Central Massachusetts seeking both scale and the ability to retain a local brand.
“If you’re a stock [bank] company and you’re competing with a credit union to acquire a relatively small target bank, your investors are going to demand that you have a discipline around your pricing and that you have a good ROI on that purchase,” he said. “If you stick to those basic sort of standards and investor expectations, you can’t beat out a credit union because they’ll overpay, because, essentially they can. They don’t have that layer of investor watchdog.”
According to the latest IntraFi Bank Executive Business Outlook Survey, 66 percent of 426 U.S. bank executives polled in January reported they felt increased competition for deposits and loans from the credit union sector as of the fourth quarter 2025. NCUA filings show 16 banks were acquired by credit unions last year, and 22 were acquired in 2024.
Credit union leaders argue that serving the community is in the DNA of their institutions. If it can help a community to have a credit union take over a bank, that should be allowed, they say.
“I don’t think we would ever lose that aspect of that,” BrightBridge President and CEO John Howard said. “From a bank and a credit union coming together, there are times when banks are suffering, there are times when credit unions are suffering. Sometimes the stronger of the two organizations is the credit union. So, if that is the better path, I think then they should be allowed to follow that path.”
Legislature Hasn’t Supported Changes
Efforts to change state law to let credit unions buy banks have largely stalled out on Beacon Hill.
In the current legislative session, there are three bills (H.1079, its companion S.837 and H.3933) that include provisions that would permit the merger of a bank into a credit union with the credit union as the surviving entity. H.1079 and H.3933 were referred to study committees – traditionally the kiss of death for any legislation during the session.
Similar patterns played out in the last three sessions, with one bill, S.720, even earning an outright rejection from the Legislature.
Both locally and nationally, trade groups for smaller banks have opposed the idea of credit unions buying banks. The national Independent Community Bankers Association published research in December 2025 highlighting the “lasting scars” these deals leave on a community.
Rice, the Hanscom FCU CEO, argued such criticism is misplaced.
“Nobody’s twisting the shareholders arms,” he said. “It’s not like we’re going down there with baseball bats to say, ‘Do this deal.’ People are deciding, and shareholders are deciding for themselves and the communities that this is a good option for them. Criticism is always welcome but I think that seems to be a rising issue, but only from a lobbyist perspective. The communities who have gone through a credit union-bank acquisition have been delighted by it.”
Credit unions slightly outperformed banks in customer satisfaction according to consultancy JD Power’s 2025 U.S. credit union satisfaction study.
Another sore spot for bank executives in M&A debates: Credit unions, as nonprofits, are tax-exempt, and they face different regulatory burdens.
The MassBankers trade association website illustrates some of those hard feelings. The group says it “continues to promote fair competition among Massachusetts financial institutions and has again sponsored legislation to ensure a level-playing field as it relates to Massachusetts credit unions constant push to expand their powers through changes to state and federal regulation.”
The association has come out in opposition to multiple bills that would expand powers at credit unions. This includes a bill (H.1034/S.652) that would allow for municipalities to deposit into and invest in credit unions. The Cooperative Credit Union Association had publicly supported this bill and also supported a failed bill to update state credit union charters in 2023.
“Our position remains clear: Massachusetts banks have no objection to authorizing credit unions expanded powers if, and only if, they are subject to the same tax and regulatory obligations as community banks,” MassBankers said in a statement when asked about changing state law to allow credit unions to buy banks.
Sosik, the Hometown Financial Group CEO, argues that at some point, as a credit union acquires more banks, the original credit union mission can be lost.
“I’m a free market guy. I think that the markets should settle these questions on their own, and if a credit union wants to buy a bank, they probably should be able to do it – but the caveat is, are you a credit union?” he said. “Aren’t you partially a bank at that point? Don’t you sort of taint this whole credit union argument, which obviously, in the big long view, includes not paying taxes?”
If a credit union is focused on the traditional mission of credit unions – providing financial services to underserved communities – then it should achieve scale by acquiring other credit unions and not banks, he argued.
“If you’re a credit union, then be a credit union, merge with other credit unions,” Sosik said. “If you don’t want to be a credit union anymore and you want to be a bank, you can do that too. Just ask HarborOne. That’s their whole lineage. I think you have to separate those two things.”
Federal Charters a Way Out?
The same tool – a federal charter – that let Hanscom FCU make its Maryland acquisition last month has other advantages for credit unions.
Littleton-based Workers Credit Union and Cambridge-based Harvard Federal Credit Union switched from state to federal charters in 2024. Pittsfield-based Greylock Federal Credit Union made the switch in 1995 because the branching process was more straightforward, according to current Greylock CEO John Bissell.
“I think the legislative bodies are wise to try to create more parity between the two charters so you don’t have a credit union feeling like they have to leapfrog from one charter to the other based on their business needs,” he said. “I think the whole system benefits when there’s greater parity.”
Metro Credit Union President and CEO Robert Cashman said he expects more credit unions to adopt federal charters over state charters to avoid legal red tape and gain the ability to combine with all types of small, local financial institutions.
“It’s taking place everywhere throughout the country,” Cashman said. “Unfortunately, here in Massachusetts, that can’t be the case. The Massachusetts credit union charter is one of the weakest in the country, and that’s primarily because the fact that the Legislature here in Massachusetts has not wanted to address this particular situation, which really doesn’t make sense. It would be great for credit unions and banks to be able to come together to maintain a local community presence.”
