Hanscom Federal Credit Union’s recent purchase of a Maryland bank means its executives face a classic task. But they and other credit union leaders say the industry has advantages over banks. iStock illustration

Hanscom Federal Credit Union’s recent acquisition of The People’s Bank highlights the challenges credit unions face navigating how to maintain a community feel while scaling upward.

The $55 million move marks Hanscom FCU’s entry into the Washington, D.C. metro area market, following the credit union’s established presence in Virginia.

The credit union’s large military membership made the expansion into Maryland and Washington a logical step, said President and CEO Peter Rice.

It was also a strategic move. The People’s Bank had an insurance company, which Hanscom FCU executives believe will be a valuable tool to add to their credit union’s belt. Along with having its own insurance agency for its members, the credit union also acquired boating insurance products which will be made available in New England.

However, the nature of credit unions typically emphasizes a specific community or geographic location. In the search for scale, that community focus can sometimes be lost.

To fight against that, the credit union will be trying to retain employees and The People’s Bank’s previous leaders, Rice said.

“Employees are key to that business,” Rice said. “Retaining the key employees and leaders is essential to maintain that the public face of the long-running relationships that The People’s Bank built.”

While it is common to see layoffs associated with financial institution mergers, Rice noted how the credit union proposed that all employees were retained.

“We want to keep everybody,” he said. “It’s usually the other way around in a bank to bank deal. But in this case, we didn’t have to do that.”

Personally Melding Organizations

Leadership presence also plays an important role.

BrightBridge Credit Union has been one of the more prolific acquirers in Massachusetts in recent years. President and CEO John Howard said he makes an effort to travel throughout the credit union’s geographic network rather than remaining at a central headquarters.

It’s a travel circuit that’s expanding after BrightBridge recently merged with Arrha Credit Union of Springfield.

“We really don’t have a headquarters. We do in a sense that we have a legal headquarters in Lawrence Massachusetts that’s documented with the secretary of state, but from a culture perspective, from a leadership perspective, there is no headquarters,” he said. “I spend one day a week in every one of the places, every one of the regions and with Springfield being new I’ll probably spend two days a week there and all the executive team does the same thing.”

He and other executives also make a point to be involved in community organizations across BrightBridge’s footprint, Howard said, adding that such habits are important when a credit union is moving into a new area.

Sam Lattof

Longer Runways for Wins

For stock banks, in particular, mergers are expected to perform well financially right away. In comparison, credit unions are able to take a longer and more patient approach to mergers and acquisitions.

“From a bank perspective, they have to be accretive to earnings immediately or shortly thereafter,” Howard said. “There’s an expectation from the shareholders. Our membership are the ones that own us, and so when we are merging, they’re not looking for the accretion to earnings per se. They’re looking for, how are you going to provide both organizations members with a better experience than they were getting before.”

The cooperative mindset of the credit union industry also helps these deals succeed compared to a banking industry where intense competition is the name of the game, he added.

“If there’s a credit union that’s doing really well, or if there’s something that we’re doing really well, and some another credit union calls us, we’ll say, ‘Yeah, here’s what we’re doing. This is how it works and feel free to come in and you can talk to our team and see how we did it,’” Howard said. “Credit unions do that for me all the time and I more than welcome folks to call me, and we share that same experience, because it’s just that kind of industry. We help each other.”