Hartford Business Journal

18 HARTFORDBUSINESS.COM | AUGUST 19, 2024 FOCUS | Banking & Finance Rocky Hill-based Nutmeg State Financial Credit Union has added members from outside Connecticut for the first time, thanks to a new state law passed last year. CONTRIBUTED PHOTO Few credit unions take advantage of new state law that allows membership expansion two decades, Connecticut lost more than half of its credit unions, with 76 operating in the state at the end of the first quarter of 2024. That's down from 164 credit unions in Connecticut in March 2004, according to National Credit Union Administration data. Despite the shrinkage, the state's credit unions over the last 20 years have more than doubled their assets to $15.2 billion and grew membership about 3% to 944,388. Nutmeg Financial Credit Union in July merged with the smaller First Bristol Federal Credit Union. As a result, Nutmeg's membership rolls grew from about 42,000 to more than 50,000, and its assets from $562.4 million to more than $700 million. The inclusion of AAA and Commu- nity Impact Fund members also helped grow membership, but that was not the prime motivator, Nutmeg CEO John Holt stressed. Rather, it helps the credit union better deliver on its mission, he said. "This is not about us trying to grow our field of membership, per se, or to go into other states, per se," Holt said. "It is to take our strategy and offer our products and services to low-to-moderate income commu- By Michael Puffer mpuffer@hartfordbusiness.com N utmeg State Financial Credit Union last year was the first member-owned cooperative to expand its membership field under a new state law. Ten months later, the move is paying dividends, as it has allowed the Rocky Hill-based credit union to add about 1,300 new members. Nutmeg previously only enrolled people who live, study, volunteer, worship or work in Middlesex, Hartford, Tolland and New Haven counties, as well as eight towns in Fairfield County. Beginning early last October, Nutmeg began enrolling members of the AAA Club Alliance, which is active in 13 states, and Community Impact Fund, which provides financial education to economically challenged communities nationally. The expansion allowed Nutmeg to add members across state lines for the first time, particularly low-to-mod- erate income individuals, helping support the not-for-profit credit union's mission. It was permitted under a 2023 change in Connecticut banking regulations that, among other things, gives state-chartered credit unions the ability to enroll members based on geography, employer groups and associations; previously they could base enrollment on only one of those categories. So far, Nutmeg is the only credit union to make use of the policy change. Credit Union League of Connecticut President and CEO Bruce Adams said he believes more credit unions have applica- tions in the works. "In the natural order of things, there will be more and more applications as credit unions do their strategic planning," Adams said. "I expect that activity to pick up at a steady pace." Adams noted this isn't the first time Connecticut-chartered credit unions have crossed state lines. East Hart- ford-based American Eagle Financial Credit Union — the state's largest credit union with $2.7 billion in assets — has members in Massachusetts, he said. Conversely, Massachusetts-based Freedom Credit Union, with $740.1 million in assets, entered the Connecticut market more than a year ago with a loan production office in Enfield; and Holyoke Credit Union, with $285.1 million in assets, recently asked permission from the state Department of Banking to expand its field of membership into Hartford County. Last year's regulatory changes gave state-chartered credit unions the same flexibility that was previ- ously afforded to federally char- tered not-for-profit cooperatives, Adams said. "I think a legal or political border doesn't have any real strong signif- icance that it might have had 100 years ago," Adams said. "We have the internet and sophisticated enough regulators that they can deal with minor variations in state regulations." The change also allows state-char- tered credit unions to better compete with banks, Adams said. Nationally, credit unions represent an average of about 10% of deposits. In Connecticut, credit unions' market share is around 7%, he said. Growing multiple ways Last year's regulatory changes occurred as the state's credit union industry searches for ways to grow in a world where the escalating costs of regulations, technology, personnel and providing services make it harder to operate. That's contributed to an industry consolidation wave: Over the last Bruce Adams John Holt

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