Massachusetts has fewer credit unions compared to last year, with more than a dozen institutions completing or planning mergers in 2019. 

For the industry’s regional trade association, these mergers are not a sign of declining interest in credit union membership. 

“Consolidation is taking place both in Massachusetts and nationally,” said Ron McLean, president and CEO of the Marlborough-based Cooperative Credit Union Association. “But on the flip side, there has been continued, strong, consistent growth when it comes to membership and assets.” 

Seven Tie-Ups Completed or Planned 

The year started with Chadwick Federal Credit Union merging into City of Boston Credit Union on Jan. 1. City of Boston Credit Union, which now has more than $450 million in assets as of Sept. 30, then absorbed Northeastern Federal Credit Union in the spring. 

Merrimack Valley Credit Union finally completed its merger with Bridgewater Credit Union in February after almost a year of planning, creating a combined credit union with more than $1 billion in total assets.  

Western Massachusetts saw West Springfield Federal Credit Union merge into Freedom Credit Union and Northampton VAF Federal Credit Union merge into UMass Five College Federal Credit Union. 

Several other mergers await approval from the Massachusetts Division of Banks or the National Credit Union Administration: 

• Sharon Credit Union and Brockton-based Crescent Credit Union plan to merge into a combined entity, Sharon & Crescent United Credit Union with a branding name of SCU Credit Union. Sharon has about $607 million in total assets, while Crescent has total assets of about $450 million. 

• Ocean Spray Employees Federal Credit Union in Bridgewater plans to merge into Merrimack Valley Credit Union. Ocean Spray has about $10 million in total assets and already operates out of Merrimack Valley’s Bridgewater location. 
• The $8.5 million Waltham Municipal Employee Credit Union seeks to merge into RTN Federal Credit Union, also based in Waltham. RTN has total assets of about $903 million. 
• Pressers Union Local 12 ILGWU Credit Union is looking to merge with Somerville Federal Credit Union. According to NCUA data, Pressers has 54 members and is the state’s smallest credit union based on total assets, with about $140,000. 

CUs Under Similar Pressures as Banks 

Nationwide, the number of credit unions has declined by nearly 30 percent since 2010, according to the National Association of Federally-Insured Credit Unions’ 2019 report, published in November. Credit unions with assets less than $250 million saw an increase in the merger rate between 2010 and 2018 compared to 2002 to 2009, according to the NAFCU report. After an initial increase in mergers during the Great Recession, larger credit unions have seen a merger rate similar to that before the financial crisis. 

Massachusetts currently has 158 credit union, including mergers that already took place this year. Both nationally and in Massachusetts, the number of credit unions peaked in the 1970s, said McLean with the CCUA, the trade group for credit unions in Massachusetts, New Hampshire, Rhode Island and Delaware. 

“[Consolidation] is very much a national trend, and I believe very much in line with the banking industry as well,” McLean said. 

Over a dozen credit unions combined or sought to merge in 2019, in several cases leading to institutions with around $1 billion in assets.

Some of the same factors driving community banks to combine have also affected credit union consolidation. Regulatory compliance has increased for all financial institutions, since the financial crisis, McLean said, raising costs. 

Competition from fintechs and mortgage lenders has put pressure on the industry, he said, adding that credit unions need to ensure they invest in the right technology. And while not all mergers involve lower–asset credit unions, these institutions could benefit from gaining access to enhanced services for members and economies of scale. 

In the face of these pressures, some credit unions have opted to expand their fields of membership instead of merge. Those expanding included Arrha Credit Union in Springfield, which added residents of some Connecticut counties; Milton-based Tremont Credit Union, which added employees of the Massachusetts Biotechnology Council and its members; and Align Credit Union in Lowell, which added residents of Norfolk and Suffolk counties. 

Even with mergers, McLean said the state’s credit unions continue to add to their membership and assets.  

“When a member walks in the door of a credit union, they are walking in as a member–owner, and that credit unions exists to help them build a better life financially,” McLean said. “Credit unions are local – the money stays local – and there’s a tremendous value in that members trust their credit unions typically more than other financial institutions.”  

Membership Expansion Key, but Criticized 

Key to some credit unions’ mergers has been their ability to amend their original definitions of membership, letting institutions serving different populations combine. 

Credit unions are tax-exempt because they are nonprofits, but many in the banking industry see this as an unfair competitive advantage credit unions have over community banks. 

“I have nothing against credit unions,” said Tom Senecal, president and CEO of Holyoke-based PeoplesBank. “I just think [the tax exemption] is so contradictory and hurtful to the industry as a whole that we should do something to level the playing field.” 

Credit union membership is built around a common bond, Senecal added, and credit unions have been eroding this bond by amending who can be members, giving them another competitive advantage. 

Diane McLauglin

“I think it’s disingenuous to imply that the credit union is supporting a specific community when it continues to expand beyond its original charter,” Senecal said. 

McLean defended credit unions’ nonprofit status, saying it was earned by how they serve their communities. Members’ household savings due to higher interest rates on deposits, lower rates on loans and lower fees – about $162 per household according to one study McLean cited – provide financial benefits to consumers and the state as well, he added.  

Email: dmclaughlin@thewarrengroup.com