Cross-border foray: Freedom Credit Union, the latest lender to cross state lines in search of growth

Where other banks see a state border, Freedom Credit Union President and CEO Glenn Welch sees a breakthrough into a new market.

This is the reason behind the credit union’s request to the Connecticut Department of Banking to open a branch in an office building at 115 Elm St. in Enfield, which will be its first location in the state of Nutmeg. .

Freedom’s expansion into Connecticut is part of a cross-border foray that several other financial institutions have undertaken in recent years, as smaller lenders see growth opportunities in mergers of large banks, such as the union of the M&T Bank based in Buffalo, New York, with People’s United Bank. The void in local, personalized customer service gives smaller institutions an opportunity to woo dissatisfied customers and fill gaps in local markets, bankers say.

Welch said the merger creates “an even greater need for individuals and small businesses to be served in Connecticut’s northernmost counties.”

Freedom, which has $650 million in assets and 10 branches, received approval from the Massachusetts Banking Division to expand its membership scope to include Hartford and Tolland counties.

The expansion will more than double the number of people and businesses the credit union will be able to serve. Welch said he sees no reason to allow the border between two contiguous states to impede Freedom’s ability to serve customers on either side.

“The region transcends political boundaries,” Welch said. “It includes the metropolitan areas of Hartford, Springfield and New Haven and is centered on seven counties, linked by a shared economy, history and culture, and by features such as Bradley International Airport, rail lines, the Interstate 91 and the Connecticut River.”

Credit union charters generally limit their scope of membership to specific communities, industries, or affinity groups. In Freedom’s case, that meant only people who lived, worked, or attended schools in four Massachusetts counties — Hampden, Hampshire, Franklin and Berkshire — were eligible for membership before its approved expansion.

The number of credit unions and banks headquartered in Connecticut has declined in recent years due to merger activity. This led to many smaller banks expanding into the state, seeing an opportunity with fewer players in the market. There were 32 Connecticut-based banks at the end of the first quarter of this year, down 24% from the first quarter of 2017, when 35 banks were based in the state, according to data from Federal Deposit Insurance Corp. .

There were 86 credit unions in Connecticut at the end of the first quarter, down 14% from five years earlier, when 101 nonprofit unions operated in the state, according to National Credit data. Union Administration.

A number of other financial institutions have crossed the Connecticut/Massachusetts border in recent years to do business.

Massive incursion

Westfield Bank, which is based in Westfield, Mass., has offices in both states. The publicly traded community lender opened its first Connecticut branch in Granby in 2013, followed by another in Enfield the following year.

Executive Vice President Kevin O’Connor said Westfield was “very pleased” with the performance of the branches and opened two more locations, one in West Hartford – the bank’s financial services center for Connecticut – and another in Bloomfield.

“We have significant market share for many of the communities we serve in Massachusetts, and as we continue to grow in Massachusetts, we want to expand with future growth in similar communities in Connecticut,” said O’Connor, whose bank holds $2.6 billion in assets. “I don’t know why others followed, but it’s very similar to the types of communities and customers.”

In 2018, PeoplesBank, the largest community bank in Western Massachusetts, acquired First National Bank of Suffield to establish its first Connecticut location. It is planning a new 2,000 square foot banking center at 50 Cedar Ave. in South Windsor and last year opened a branch in the chic West Hartford Center. The South Windsor location will be its fifth in the state.

PeoplesBank, with $3.6 billion in assets, is a mutual lender, meaning it can generate profits but cannot be bought or sold.

President and CEO Tom Senecal said recent mergers have created an increased need for community banking services.


PeoplesBank President and CEO Tom Senecal said recent merger activity has created an increased need for community banking services.

“We believe mergers and acquisitions create disruption in the market, and when disruption occurs people typically flock to community banks or mutual banks,” Senecal said.

Some borrowers, especially commercial ones, like to deal with a community bank rather than a larger transaction because decisions are made more efficiently, he said. In addition, they have access to people who know the community well in a physical environment.

“Local decisions are commercially important because they speed up the decision-making process — they don’t go through a large bureaucracy of decision-makers,” Senecal said, noting that about 70% of PeoplesBank’s commercial lenders are in Connecticut.

East Hartford-based American Eagle Financial Credit Union, with $2.4 billion in assets, also crossed state lines, when it gained approval in 2019 to serve customers in Hampden County. in Massachusetts.

Relationship Building

Although mutual banks and credit unions have different business models, they both focus on the value provided by a local banking approach. In the case of Freedom Credit Union, entering the Connecticut market will mean establishing business relationships with new customers who are already familiar with their organization.

“Many people who live near the state line shop, dine, seek entertainment, etc., while crossing the interstate line,” Welch said. “We had companies that had relationships with credit union staff who wanted to do business with us, but were also not eligible to become members.”

Freedom’s Enfield branch, less than seven miles from its headquarters in Springfield, Mass., is scheduled to open in July.

Freedom has about 32,000 members and has seen significant asset growth due to lower consumer spending during the pandemic, with “steady but slow” membership growth, Welch said.

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