Former CEO & Board Members Oppose Proposed Merger of Vermont’s Largest CUs

When Steven D. Post stepped down as president/CEO of Vermont State Employees Credit Union in 2014, he never foresaw that it could go from “strong to gone in just eight years.”

Post and former credit union board members have organized to oppose the proposed merger of the $1.9 billion New England Federal Credit Union in Williston and the $1 billion VSECU in Montpelier, the state’s largest credit unions and the industry’s largest consolidation announced so far this year. VSECU members will be voting on whether to approve the proposed merger later this year.

“A merger of VSECU and NEFCU will not serve VSECU members in any material way and it will make for a more homogenized and less dynamic financial services marketplace in Vermont,” Post said on the Calling All Members website. “Bigger is not always stronger and, this case, it is not better.” What’s more, merger opponents argued that losing VSECU will deprive Vermonters of a trusted and true friend that has helped members and their communities thrive.

“Over the past 75 years, it has become a credit union custom-made for Vermont like no other – built for Vermonters, by Vermonters,” he wrote on the website that is asking members to join their effort to defeat the merger.

However, in a prepared statement, VSECU said the objective of the proposed consolidation is not to get bigger for the sake of size.

“The objective is to bring resources together and leverage those resources in a dynamic and competitive environment, for the direct benefit of members who value a local and home-based financial institution,” VSECU said. “This is growth from within and not outside, where larger banks and other financial institutions are emerging in our state as banking alternatives.”

Bill Smith, chief marketing and retail officer for NEFCU, said it was anticipated that there would be some opposition to the proposed merger and an argument would be made to stay independent.

For example, Post mentioned when he served as CEO he operated in respectful “co-opetition” with NEFCU, which made both credit unions more valuable to members and immensely productive as evidenced by the strong growth of both credit unions over the years.

However, over the last five years, Smith noted that some prominent Vermont banks have been acquired by super-regional banks that are gaining market share throughout the state, and big banks, such as Chase, are now expanding in Vermont.

He also pointed out that while NEFCU has been growing its membership, it’s been under the peer average of 3.82%. Last year, the credit union posted membership growth of 2.21%; 2.70% in 2020; 2.04% in 2019; 0.41% in 2018 and 1.23% in 2017, according to NCUA financial performance reports.

Smith said some of that subpar growth can be attributed to Vermont’s long-term population declines and bank competition.

For VSECU, membership growth was only 0.64% in 2021, well below the peer average of 3.82%, but the credit union posted better membership gains of 2.58% in 2020; 3.18% in 2019; 4.09% in 2018 and 4.08% in 2017, according to NCUA financial performance reports.

“I think there’s a reality in financial services that the large banks are gaining market share. And credit unions, in general, are losing market share,” Smith said. “It’s important that we’re able to compete with the services that they’re able to offer, and those [services] require investments, cooperation and synergy within the credit union movement. I know that we have a lot of members that are also banking with Chase or Quicken because of the capabilities that they’re able to deliver, and we need to compete with that.”

Nevertheless, merger opponents argued that in addition to VSECU’s proven ability to compete on its own for 75 years, the credit union has become part of the fabric of life in Vermont.

M. Jerome Diamond, a former VSECU director and board chair, said the credit union has been a financial rock for the central Vermont community.

“Our mission has been, and should continue to be, to support our members wherever they are, but to be there for people and places in Vermont who are desperately trying to maintain their communities and find ways to build their regional economies,” Diamond wrote on the Calling All Members website. “If we merge with anyone, without retaining control of the board, VSECU’s mission will be going. This proposed merger guarantees us that VSECU members will never control the identity or purpose of the new institution.”

Kimberly B. Cheney, who also served as VSECU’s director and board chair, said it is inevitable that being absorbed into a larger corporation will dilute credit union policy by focusing on more profits, less personal attention and greater managerial salaries. She noted that VSECU has been part of the community because it is sensitive to individual needs with the goal of giving as much back as possible with favorable rates and compassion for people having unexpected financial needs.

“I repeat,” she wrote on the website. “This merger is not in the interest of VSECU’s current members!”

However, VSECU said in its prepared statement that the board was elected by VSECU members to make decisions based on what it views to be the best interests of the membership. In February, the VSECU and NEFCU boards unanimously approved to pursue the consolidation.

“We honor and celebrate the democratic process and empower our members to use their voice. Ultimately, members will vote and decide because that’s part of who we are as a cooperative,” VSECU said. “We have confidence that our members will understand the value of this partnership as we engage with our membership over the next six months leading up to a membership vote.”