A big selling point for credit unions is their personal touch, the connection of a local not-for-profit institution whose mission is serving members rather than shareholders. Some credit unions are deciding this mission can be better served with modern technology and fewer brick-and-mortar locations. Charter Oak Federal Credit Union, an 85,000-member institution with $1.6 billion […]
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A big selling point for credit unions is their personal touch, the connection of a local not-for-profit institution whose mission is serving members rather than shareholders.
Some credit unions are deciding this mission can be better served with modern technology and fewer brick-and-mortar locations.
Charter Oak Federal Credit Union, an 85,000-member institution with $1.6 billion in assets serving New London and Windham counties, is allowing the lease of its Long Hill Road branch in Groton to expire at the close of the year. That will leave Charter Oak with 15 branches, including two others in Groton.
Brian Orenstein, president and CEO of Charter Oak, said closure of the 6,000-square-foot branch will save the credit union around $250,000 in rent and taxes. Staff will be moved to other locations.
Orenstein said walk-in branch use has decreased as members increasingly moved to online banking services during the pandemic.
“So many of our transactions switched to electronic because of the pandemic and haven’t come back, haven’t switched back at all,” Orenstein said. “So, having that knowledge, it really just made a lot of sense to let that lease expire.”
Charter Oak added a branch every year between 2012 and 2016. Orenstein said his credit union decided to strategically focus on digital services in 2016.
Today, Charter Oak’s customers can make deposits, complete loan applications and handle just about any transaction online, Orenstein said.
“I guess the only thing you can’t do electronically is put something in your safe deposit box,” he said.
Other Connecticut credit unions are following in Charter Oak’s path. The state’s 85 federally-insured credit unions have collectively closed 10% of their branches since June 2018, according to National Credit Union Administration data, as they turn more of their attention and investment capital to digital capabilities.
At the end of June 2022, they had 241 brick-and-mortar outposts, down from 267 in June 2018. In 2011, Connecticut credit unions had 292 branches, NCUA data shows.
Transformation acceleration
Hartford Federal Credit Union closed its downtown Hartford and Newington branches over the past two years, leaving it with four locations, according to CEO and President Ed Danek Jr. The credit union continues to maintain an ATM at the Newington location.
“One of the interesting things about the shutdown and COVID is it really accelerated the transformation from in-person services to utilizing many of our electronic products and services,” Danek said. “We’ve gone from six to four (branches) and it’s much more efficient. We are seeing more people who don’t want to come into branches, who would prefer to do things remotely.”
Hartford Federal, a 17,000-member credit union with $159.9 million in assets, doesn’t have a technology research and development department. But it doesn’t need one.
Danek said the credit union has been able to contract out popular services like online bill payment, electronic check deposits and artificial intelligence to detect fraud.
“We call ourselves a fast-follower,” Danek said.
Connex Credit Union, with $932.7 million in assets, is building a flagship location in North Haven, which will replace a smaller nearby branch, said CEO and President Frank Mancini. So, it will maintain eight branches to serve about 67,000 members.
The new flagship branch will be “more representative of our growth,” offering a larger space and more amenities, Mancini said.
Mancini said Connex has moved away from scheduled growth in branches, but might take on a new location if a strategic opportunity arises.
“We are going to be very careful because the cost is prohibitive given the current rates,” Mancini said. “We are not intentionally looking, where in the past we were intentionally focused on branches.”
Mancini said there has been a major contraction among credit unions over the past decade as some institutions merged to become more efficient and others failed. There were 85 credit unions in Connecticut at the end of the second quarter, down from 134 in 2010, according to NCUA data.
Connecticut has been a challenging market, given its low rate of population growth and the propensity of its college graduates to seek employment out of state, Mancini said.
Mancini has also seen a big transition to online services prompted by the pandemic, notably by older members who weren’t expected to make the move so readily.
“They learned they could deposit by phone, use bill pay online,” Mancini said. “They adapted and they learned how to use our electronic channels.”
Connex already offers a full range of online services, but will still spend millions in the coming two years to make them more “seamless and integrated,” Mancini said.
