Fitchburg-based Workers’ Credit Union, whose corporate office is shown above, is merging with two smaller credit unions based in central Massachusetts.
In a move one analyst says reflects five specific trends prevailing in Massachusetts’ financial sector, two small credit unions based in central Massachusetts are merging with one of the largest in the state, creating an entity worth $554 million.
The deal took place after Fred Healey – president and chief executive officer of 62,000-member Workers’ Credit Union, based in Fitchburg – met with officials at Crobank Credit Union of Westminster, which has $1.2 million and 179 members, and Peoples Community Credit Union of Leominster, which has $11.7 million and 2,600 members.
The two smaller credit unions “decided it would probably be best to merge, so they could provide the products and services that members need,” according to Workers’ Senior Vice President of Marketing Gordon Wetmore.
Banking attorney Kevin J. Handly of Gallagher, Callahan and Gartrell in Boston said the most important trend he sees reflected in the merger is one involving state-chartered credit unions converting to community fields of membership – the idea that “if you live, work or worship in this community, then you can belong.”
“That’s different from the old days, when you had to be employed by a certain employer,” Handly said. “This is a real trend in Massachusetts, within the past five years Â… it certainly would not have been considered the mission of a credit union decades ago.”
In fact, Workers’ Credit Union is open to anyone who lives or works in Massachusetts, including their immediate family members, while Crobank and Peoples have membership charters that are specific, respectively, to an employer and geographic region.
The merged entities will combine assets and memberships effective Nov. 30; Crobank’s limited-hours office will close on that date and Peoples’ office will change hands, even though that branch and all employees will be retained, officials at Peoples and Workers’ said.
Rob Kimmett, senior vice president of public relations and marketing at the Massachusetts Credit Union League, said an important point to keep in mind is that “nobody gets rich on a credit union merger.”
“The difference between this kind of merger and most is that there’s no economic incentive for any credit union merger,” he said.
Rather, he noted, “The decision that [all parties] make when they come to the table is, ‘Is this in the best interest of our members?'”
Wetmore noted that membership quorums of Crobank and Peoples voted unanimously to approve the merger.
‘Competitive Pressure’
Boards of directors of smaller credit unions sometimes realize that their ability to develop new products, comply with government regulations and maintain the type of technology they need to deliver products and services “can be pretty daunting,” Kimmett explained.
“You need a lot of technology,” sometimes for just 1,000 to 1,500 members, he said, and sometimes it’s not financially feasible to obtain and provide it for such a relatively small group.
Handly agreed. “Financial institutions, particularly community financial institutions, are feeling intensified cost and competitive pressure to get larger and become more efficient,” he said.
Peoples Chief Executive Officer and Treasurer James G. DiConza said in a statement about the merger that “by joining forces Â… we will ensure that our members’ financial needs will be fulfilled well into the future.”
In another statement, Crobank President and Chairman Joseph Kinney said the deal “will allow us to meet the financial needs of our members with products and services like online banking and an extensive branch network.”
Crobank Treasurer and Manager David A. Joslin, a former Fitchburg paper mill worker who now runs the credit union part-time, said last week that Crobank thought about opening up to family members of employees of Crocker Technical Papers in Fitchburg, but didn’t have the resources to get up to speed, technologically.
“We didn’t have mortgages, no ATM cards and no checkbooks,” he explained. “But then again, my members could call here from vacation in Florida and say, ‘Dave, I need a check. Can you send me $500 from my account?'”
Joslin said Crobank approached Workers’ for a possible merger because it was local, had financial services its members could use and had recent experience with mergers.
Handly said credit unions and some banks are also, these days, moving to “fill the void” created by the consolidation of community banks in many regions. For example, in Fitchburg, he said, five banks were locally owned in 1995, versus three today (others were bought by larger banks).
One result of those consolidations is that bankers with years of experience are sometimes left without jobs, he said – and more and more of them are turning up at credit unions.
“They bring a banking orientation and a banking culture, and a merger is part of that,” Handly suggested.
Wetmore, in fact, has 29 years of banking experience in the MetroWest portion of Massachusetts, and Healey is also a former banker.
Wetmore agreed that bankers are “competitive,” but said that the difference is that in credit unions, “the cooperative nature” and the question of what’s in members’ best interests fuel all decision-making.
“The for-profit model – ‘how do we cut costs and create additional profit?’ – that’s just not the credit union model,” Kimmett added.
The last trend Handly said he sees, which might draw consumers to a larger credit union with some of the bells and whistles of the modern age, is the “dissatisfaction of many consumers with the services and fees of larger banks” and what they might get instead at a smaller, locally based credit union.
That balance is struck, Healey indicated in a prepared statement for Crobank.
“One of the key benefits of merging is to enhance the value of being a credit union member,” he said. “We will be able to provide Crobank members new products and services, with outstanding customer service.”
“Our primary focus is to make sure that all our members enjoy a high level of service, which is first and foremost for our credit union,” he added, in another statement about the Peoples merger.
