What’s being local got to do with it?
Sixty years ago, nobody in Vermont said “local banking.” They didn’t need to. There was only one way to bank: the branch close to your home, or office, or — even closer — right inside the office building itself. Your banker often was a friend or neighbor and personally knew his customers. Banking was, by definition, local. I know this because my dad managed one of those branches 60 years ago, and I managed one 40 years ago. But that was then. What’s local got to do with anything now?
For starters, “local” and “banking” are no longer synonymous. America’s six largest banks cover the country and internet and control 40% of market share. Chase, biggest of the big, has $2.7 trillion in assets. Such growth comes with a cost. One way the big banks get bigger is by consuming smaller institutions. Chittenden, Merchants, BankNorth, Peoples United and others have all been acquired this way. Since 2008, in fact, one in four local banks has vanished. There is no reason to believe that trend will reverse, and it may well accelerate.
What accounts for this trend? Two words: big and easy. Big may not mean better, but it does mean more — more advertising, marketing, promotions, reward programs, loan terms, mortgage offerings, on and on. Chase alone has 26 credit card programs. For better or worse, we tend to love big, even when it’s not especially good for us. (Remember “SuperSize Me?”). Easy is the other part, thanks to rapidly evolving digital delivery systems. One example will suffice: Vermonters can get mortgages from Quicken Loans without ever leaving their living rooms. Launched in 2008, Quicken is now Vermont’s second-largest mortgage lender, with 7.4% market share. (NEFCU has 16.6% and VSECU 3.5%.)
Understandably, in this age of “crazy-busy,” big and easy have their appeal. Thus, five regional, for-profit banks now control 60% of Vermonters’ deposits. But leaving local behind for big and easy comes with a cost. Those supersized banks exist for one main reason: to maximize profits for investors. That means more penalties, greater fees, higher interest rates, lower investment returns, and stricter rules.
Credit unions like NEFCU and VSECU are the epitome of local. They exist not to profit investors but to benefit members with local ownership (members themselves) and all that goes with it: higher deposit rates, lower fees and loan rates, new and better services, and major contributions to communities. That’s not just talk. The federal government’s National Credit Union Administration’s monthly comparison for June 2022 showed that, in every one of 23 categories, credit unions’ returns on investments were higher, and fees and interest rates were lower, than banks. Again, one example will suffice: The national average credit union new car loan rate was 2.90%. Banks’ average rate was 4.71%. It’s like that all the way down the columns. Bottom line: It’s in Vermonters’ best interests to keep their credit unions strong, competitive — and local. But it is increasingly difficult for smaller local institutions to match the billions that big banks are spending on advertising, marketing, promotions and constant streams of “innovations.” (Many perhaps more sizzle than steak: Does anyone really need 26 credit cards?) To compete — to survive — smaller institutions are left with two options. One is ominous: cut costs, limit delivery systems and slash product options. And even that, sadly, may only buy time, as the local attrition rate noted above suggests.
A second option, however, is empowering and embodies one of our most cherished Vermont traditions: joining together in times of challenge. That option maintains local character, member ownership, personal service, community connection, and cutting-edge innovation, by joining. Since their creation, both NEFCU and VSECU have been Vermonters serving fellow Vermonters with Vermont pride and quality. Throughout decades, they have become the largest member-owned financial institutions in our state not by profiting outside investors but by harnessing the power of local. Joined together, the new credit union will have 17 local branches statewide. Its 500 employees will be local Vermonters. Almost 90% of its 165,000 members will be Vermont residents. Its $3 billion in assets will be domiciled in Vermont. And the best products of each will be available to all.
So, after all, what’s local got to do with it? The new, still-local entity will not just survive in this era of supersized competition — it will thrive — but only if the merger is approved. A vote for the merger is a vote for local. And that’s got everything to do with the present we have and the future we create.
Bill Smith is marketing and retail officer at NEFCU.