Albany Times Union (Sunday)

Merger is a trend in uncertaint­y

SEFCU, CAP COM creating stronger company amid COVID, global change

- By Larry Rulison

Last week, members of the CAP COM credit union were sent a packet of materials so they can cast vote on whether to merge CAP COM with SEFCU, the largest credit union in the Capital Region.

Credit unions merge all the time in the United States, and it’s been somewhat common in the Capital Region, especially among smaller credit unions.

But the deal between SEFCU and CAP COM, a so-called merger of equals involving the two largest credit unions in the area, is important for consumers to follow because it reveals a trend in the financial services sector that is forcing banks and credit unions to bolster their finances in the wake of the pandemic.

And while the pandemic’s worst days appear to be behind us, consumers are still facing an uncertain economic future amid surging inflation, geopolitic­al uncertaint­y that is disrupting supply chains and rising interest rates.

At the same time, customers are demanding the latest digital banking technologi­es being offered by the largest banks as they increasing­ly do banking from their phones.

In this risky and swiftly changing landscape, SEFCU and

CAP COM looked at one another, and each found the perfect partner to secure their survival.

They will emerge as a newly branded credit union that will be the largest in the Capital Region, with more than 520,000 members and $8.3 billion in assets, and one of the largest credit unions in the entire state and beyond.

That will result in a rare breed of credit union that will have the size to compete with the largest banks in the Capital Region. It will be a super-credit union that isn’t just looking to compete with other credit unions but provide its members with the best interest rates, customer service and technology options they can find.

“This is likely about opening up new markets and gaining

efficienci­es of scale,” said Taylor Nelms, senior director of research at the Filene Research Institute. “Both are among the largest credit unions in the U.S. The vast majority of credit unions are very small.”

The Madison, Wis., credit union think tank is named in honor of Edward Filene, the Boston businessma­n who started the Filene’s department store chain, but also helped start the credit union industry in the U.S.

CAP COM members have until June 22 to cast their vote online, although mail-in votes must be received by the end of the business day June 21. The merger will be approved as long as a majority of the votes received are cast in favor of the deal.

The largest credit union in New York state is Bethpage Federal Credit Union on Long Island, with $11.47 billion in assets.

But the merged SEFCU-CAP COM credit union will have more members than Bethpage, which was originally created to serve Grumman Aircraft Engineerin­g Corp. employees in the 1940s. It had 432,699 members at the end of 2021. And SEFCU-CAP COM will have 61 branches across the state, compared to 33 for Bethpage.

Industry analysts say that having $1 billion in assets sets a credit union apart. Nelms said 90 percent of U.S. credit unions have less than $800 million in assets, and half have less than $50 million.

SEFCU and CAP COM were already in the top tier of credit unions in New York state with more than $2 billion in assets, a benchmark reached by just 15 credit unions in the state.

So if SEFCU was ever looking for a partner that was truly equal to merge with, CAP COM fits the bill, and the credit union would likely have had other suitors looking to merge if SEFCU didn’t. For instance, Hudson Valley Credit Union of Poughkepsi­e, which was originally created to serve IBM employees and serves the Capital Region, is nearly identical in size to SEFCU.

“Consolidat­ion is, and will likely continue to be, a reality for the credit union system and for credit union leaders,” Nelms wrote in a March blog post.

The merged SEFCU and CAP COM credit unions will also get a new name, although what that new name will be is a closely guarded secret. The more important task will be to merge the two credit unions onto one platform and one leadership structure. Michael Castellana, CEO of SEFCU, would become CEO of the new credit union, while Christophe­r McKenna, CEO of CAP COM, will become president. Patrick Kelly, chair of the CAP COM board of directors, will become chair of the board of the new credit union.

That will leave Sunmark Credit Union as the second-largest credit union in the Capital Region with $1 billion in assets and 83,583 members at the end of 2021, according to the Credit Union National Associatio­n, an industry trade associatio­n.

Sunmark, which was originally started for General Electric Co. employees in Schenectad­y, is celebratin­g its 85th anniversar­y this year and is working harder than ever to differenti­ate itself from larger banks — even as its grows its membership and balance sheet to be able to compete better with them.

“Sunmark continues to look for opportunit­ies to grow and expand in the communitie­s we serve,” said Sunmark CEO Frank DeGraw.

“We’re proud to be the alternativ­e to big financial institutio­ns. Our size allows us to personally know our members and offer individual­ized service, while being large enough to meet all of their financial needs.”

 ?? Lor Van Buren / Times Union archive ?? Chris McKenna, CEO of CAP COM, will become president of the new credit union that will emerge from the merger with SEFCU.
Lor Van Buren / Times Union archive Chris McKenna, CEO of CAP COM, will become president of the new credit union that will emerge from the merger with SEFCU.
 ?? Paul Buckowski / Times Union archive ?? Michael Castellana, CEO of SEFCU, will become CEO of the new credit union that will be created after the merger with CAP COM.
Paul Buckowski / Times Union archive Michael Castellana, CEO of SEFCU, will become CEO of the new credit union that will be created after the merger with CAP COM.
 ?? Times Union archive ?? Sunmark Credit Union will become the second-largest credit union in the Capital Region after the CAP COM and SEFCU merger.
Times Union archive Sunmark Credit Union will become the second-largest credit union in the Capital Region after the CAP COM and SEFCU merger.

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