Hartford Business Journal

16 HARTFORDBUSINESS.COM | MARCH 20, 2023 Jo-Ann Palladino is the president and CEO of Bethel-based SoundView Financial Credit Union, which is in the process of merging with Western Connecticut Federal Credit Union. HBJ PHOTO | STEVE LASCHEVER 'Strength In Numbers' Amid consolidation wave, CT has lost 45% of its credit unions in 15 years By Michael Puffer mpuffer@hartfordbusiness.com F ifty-seven years after it was founded to provide financial services to Danbury Hospital employees, Western Connecticut Federal Credit Union is seeking to become part of SoundView Financial Credit Union. The two Bethel-based credit unions — with $34.6 million and $43.8 million in assets, respectively — asked to merge in February. So did Sikorsky Financial Credit Union ($1.1 billion in assets) and McKesson Federal Credit Union ($31.1 million in assets), both based in Stratford. The state Department of Banking last month also approved the merger of Stamford Postal Employees Federal Credit Union into East Hart- ford-based America's First Network Credit Union to form an institution with a combined $74.4 million in assets. The merger wave is part of a long- term consolidation trend within the industry, which, unlike commercial banks, operates under a not-for-profit model. The number of Connecticut credit unions has been cut nearly in half over the past 15 years, even as the industry's overall customer base and assets have grown. Credit union executives cite growing costs of providing existing services and the need to modernize as key factors driving the consolidation. "The rationale behind the merger is we will be a larger entity, able to provide members and potential members better services," said SoundView President and CEO Jo-Ann Palladino. "There is strength in numbers." Fewer institutions, more customers At the close of 2007, Connecticut was home to 148 credit unions with a combined $7.1 billion in assets and 884,449 members. Fifteen years later, at the end of 2022, the number of individual Connecticut credit unions dropped 45% to 82 institutions. Despite the shrinkage, the state's credit unions since 2007 have nearly doubled their assets to $14.7 billion and grew membership 6.8% to 944,388. "One of the things that tells you is that people love their credit unions, or they love being in a credit union and once they are in, they don't want to leave," said Bruce Adams, president and CEO of the Credit Union League of Connecticut. "But it also tells me that operating a small financial institution in today's economy and regulatory environment is so burdensome and so expensive that financial institutions are finding themselves faced with considering a merger in order to keep providing services to their members." A typical credit union with $50 million in assets and eight employees might turn a surplus of $20,000 to $30,000 annually, Adams said. That leaves little money left over for long- term investments in areas like tech- nology to sate consumers' increasing demands for digital banking services. Credit unions are also facing inflationary and other economic pres- sures shared by all businesses. Plus, the regulatory burdens that come along with being federally-insured financial institutions have long been a challenge. "They are lucky to end the year in the black, even though they have plenty of money, they are well capitalized," Adams said. "They are perfectly successful businesses, but the opportunity for growth and changing to meet the expectations of your membership, that gets squeezed so hard." In 2022, the state's 84 credit unions did experience a strong recovery from the pandemic, posting a combined $125.2-million surplus, up from $71 million in 2021. That was a higher surplus than even the pre-pandemic years of 2019 and 2018. Gaining scale Credit unions differ from banks mainly because of their not-for-profit status — they are owned by their members and set up as cooper- atives. Credit unions also tend to serve only a specific region or group. Today, SoundView is open to those who live, work, worship or volunteer in Fairfield or Litchfield counties, as well as all employees of Procter & Gamble, Gillette or Duracell. The credit union is also accessible to employees and family members associated with other greater Danbury employers.

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