With mergers and acquisitions transforming the Massachusetts banking industry this year, smaller financial institutions, including credit unions, could have opportunities to benefit from the disruption in the market.  

Like community banks in the region, credit unions will likely have opportunities to gain new customers and employees. While facing their own challenges in the industry’s competitive landscape, credit unions could offer an alternative for customers. 

“I think we benefit from [the disruption with mergers] because those institutions become even bigger, and they lose the personal touch that we offer to our membership every day,” said Neil Gordon, president and CEO of the City of Boston Credit Union. “When we offer that relationship where we get to know the member, it becomes a partnership between us and the member, and we basically support them throughout their life.” 

As not-for-profit organizations owned by their members, credit unions often offer better deposit and loan rates compared to banks. Credit unions also historically outperformed banks in the industry benchmarks measured by the American Customer Satisfaction Index.  

That performance has changed. In its annual report on the financial, insurance and health care sectors, the ACSI found that credit unions had fallen behind banks for member satisfaction for the first time in 2019 and again in 2020. After achieving a high score of 87 on a 100-point scale a decade ago, credit unions dropped to 77 in 2020, one point behind banks.  

Several categories, including staff courtesy and website satisfaction, declined year-over-year. And unlike banks, credit unions saw member satisfaction drop during the pandemic, scoring 75 between April and September of 2020. 

“Perhaps more so than bank customers, credit union members may be missing the personal touch that their institutions could more easily achieve prior to the constraints of the pandemic,” the ACSI said in its 2020 American Customer Satisfaction Index Finance, Insurance, and Health Care Report. 

Digital Changes Could Lure Deposits 

The personal touch alone might not be enough for credit unions to remain competitive. Like other financial institutions, credit unions need to be relevant to consumers, said Robert Cashman, CEO of Chelsea-based Metro Credit Union. 

“The ever-changing landscape of the financial services industry is something that we all have to keep our eye on. It’s just not the banks and credit unions competing,” Cashman said. “There are nontraditional players in the marketplace – fintech companies are becoming more prevalent, the use of technology has become more prevalent.” 

Metro Credit Union, which has $2.4 billion in assets, sees a combination of digital capabilities and the service provided at branches as critical for positioning the institution as a leader among financial services firms in the local market, Cashman said.  

The acquisitions of Century Bank by Eastern Bank and East Boston Savings Bank by Rockland Trust will bring two more banks with more than $20 billion in assets into the market. Buffalo-based M&T Bank’s acquisition of People’s United Bank will bring a new name to the Massachusetts industry. 

This changing landscape could see customers rethinking their relationships with banks.  

“I think there’s a great opportunity for credit unions to really fill a void,” Cashman said. “Many of the consumers or businesses that were doing business with any of those institutions may not want to be with an organization that is so large.” 

Credit unions will also have opportunities to recruit staff, including those who might prefer to be employed by a smaller institution, Cashman said, adding that Metro Credit Union provides stability as an employer. 

With 35 branches scheduled to close in Greater Boston as part of the acquisitions, Cashman added that there might be opportunities to open new branches in some of those markets. 

Credit union leaders see an opportunity to gain business customers and deposits from average consumers as banks engage in a wave of mergers.

Opportunities for Growth, and Limits 

Credit unions themselves are often involved, though not on the scale of the bank deals Massachusetts is seeing this year. Metro Credit Union acquired Gloucester Municipal Credit Union earlier this year and is in the process of acquiring Gloucester Fire Department Credit Union. Shrewsbury-based Central One Federal Credit Union acquired Saint Vincent Hospital Credit Union last month, and Pittsfield-based Greylock Federal Credit Union is acquiring Credit Union of the Berkshires. 

Mergers have provided Metro with a path for growth, Cashman said, adding that they also help the industry helping smaller institutions that struggle with the costs associated with technology and regulation keep their members within a credit union. 

City of Boston Credit Union made two acquisitions in early 2019 – with Chadwick Federal Credit Union and Northeastern Federal Credit Union – that have helped the institution grow from around $400 million to $615 million in assets.  

While still a credit union for the city of Boston, membership is also open to those who live and work in Suffolk, Middlesex and Norfolk counties. Gordon, who became the credit union’s president and CEO at the start of 2021, has seen assets, deposits and membership continue to grow this year.  

The City of Boston Credit Union is focusing now on organic growth, and Gordon said the credit union’s member-first culture will help distinguish it from the institutions involved in acquisitions.  

“When those institutions get too big, it’s where the member gets lost,” Gordon said. “Then it just becomes an electronic relationship, meaning you just do your deposits online, you deposit your checks and you only really interact with your institution when you have a problem – you never really develop a relationship.” 

Commercial Lending Eyed 

The credit union did not to participate in the Paycheck Protection Program in 2020, but Gordon decided to get involved when he joined the credit union this year. He said the credit union was able to work with small business owners who had difficulty getting loans last year. 

He is now looking to establish a commercial lending team to offer commercial real estate, construction loans and other products for small businesses, particularly restaurants, Gordon said. 

Diane McLaughlin

“The Paycheck Protection Program was a good gateway to offer those services,” Gordon said. “We now have a lot of small businesses that are members, and now they’re asking for more products and services, and we’re able to be agile enough to offer that to them.” 

Gordon sees future growth in Middlesex County especially, including in Gateway Cities like Lowell, where the credit union’s low-income designation and flexible underwriting practices will provide opportunities in that market. 

City of Boston Credit Union also recently acquired a building on West Broadway in South Boston that will become the new headquarters. Gordon said the board approved a 20 percent increase in staffing by the end of the year.