Sandwiched between New York, New Hampshire, and Canada, Vermont embraces a fiercely independent spirit that dates back to the 1770s when Ethan Allen’s Green Mountain Boys fought for independence from the British.
Home of maple syrup and Ben and Jerry’s ice cream, Vermont was among the first states to outlaw slavery and remains one of the more progressive states in the country. In addition to introducing the world to U.S. Sen. Bernie Sanders, Vermont is one of the few places in the country with statewide planning authority and a statewide ban on billboards.
Headquartered in the state capital, VSECU (Vermont State Employees Credit Union, $1.1B, Montpelier, VT) is likewise setting itself apart. Described as the “greenest credit union in the country,” VSECU’s growing green lending program promotes renewable resources and energy efficiency to create a more sustainable, affordable future for members. But the credit union’s optimistic vision for the future doesn’t stop with lending; it also supports causes such as hunger relief, local cooperative businesses, winter heating discounts, medical cannabis banking, and immigrant resettlement.
Adopted in 2016, VSECU’s vision statement is to “inspire a movement that brings people together to empower the possibilities for greater financial, environmental, and social prosperity.” That’s a reflection of the mindset synonymous with the state of Vermont.
“We’ve always been a values-based organization,” says Rob Miller, VSECU’s CEO since 2014. “But more than 10 years ago, our board adopted an environmental mission statement for the organization that put us squarely in the category of sustainability.”
According to Miller, VSECU’s sustainability is about more than the environment.
“It’s our members’ economic prosperity, their community wellbeing, and the total quality of life that we’ve always focused on,” the CEO says. “The biggest change over the past five years is that we’ve become more publicly embracing of that image.”
Crossing $1 Billion In Assets
Today, that reputation is paying off. As VSECU was helping Vermonters weather the pandemic in January 2021, the credit union quietly passed $1 billion in total assets. Notably, VSECU did it mostly through organic growth, aside from only two small mergers in 2014 and 2015.
According to Miller, the credit union reached that $1 billion milestone largely thanks to deposit and asset growth. Like elsewhere in the industry, federal relief payments as well as low interest rates underpinned growth in those areas. In fact, year-over-year first mortgage growth at VSECU hit a whopping 68% in the third quarter of 2021. But that’s not the only growth the credit union has recorded.
“We’ve also seen growth in some of the businesses we’ve been leaning into, particularly our green lending program,” Miller says. “VGreen, as we call it, has seen steady and consistent growth over the past five or six years and now exceeds about 10% of our total assets.”
Success at VSECU, according to Miller, is a combination of many different factors, including a change to the credit union’s charter. VSECU was founded by seven state employees who wanted to offer affordable savings and credit for themselves and fellow state employees. In 1947, the Vermont State Employees Credit Union earned its state charter and opened its first office in a state office building in Montpelier.
Membership was originally reserved solely for state employees, but in the 1960s, that expanded to include family members of any current member of the credit union. In 2002, the field of membership expanded again to include anyone who works or lives in the six counties of Addison, Caledonia, Chittenden, Lamoille, Orange and Washington. The credit union added Rutland County in 2006.
In 2009, after key changes in state legislation, VSECU became the first credit union to serve anyone who lives or works in Vermont. As a statewide community-chartered credit union serving its founding and affinity members in addition to every person who lives or works in Vermont, the credit union shortened its branded name to simply VSECU with a brand campaign highlighting that the “E” stands for “everybody.”
Since then, membership has doubled to nearly 71,000 members. Nearly one in every nine Vermonters is a member, who the credit union serves through its nine branches.
In 2017, the credit union again expanded its state charter to offer green energy loans and membership to individuals outside of Vermont who are members of the Northeast Sustainable Energy Association. That opened the door for contractors doing business in Vermont and neighboring states to offer VSECU financing for solar panels, geothermal, energy efficiency projects, and more.
Challenges Ahead
Although geography and climate help to define Vermont, they also pose challenges to the state’s future prosperity. The rolling, tree-covered mountains, picture-perfect postcard towns, and ski resorts attract millions of tourists every year, but only 643,000 residents live in Vermont year-round, making it the second-smallest state in population next to Wyoming. According to the U.S. Census, Vermont grew 2.8% between 2010 and 2020 — the 12th-lowest in the United States — and low birth rates combined with an aging population are slowing that growth even more.
That makes for a highly competitive climate in a static market. VSECU’s 12-month member growth was 1.18% as of Sept. 30, 2021, compared with 4.91% for credit unions with more than $1 billion in assets.
“Membership growth has been challenging,” says Terence Field, senior vice president of finance at VSECU. “There continues to be consolidation in the financial services industry in Vermont. Our competitors are getting bigger. The banks are getting bigger and introducing more offerings. The consumer, the member, has plenty of choices for products and services.”
As of Sept. 30, VSECU’s average loan amount of $28,367 was 49% higher than all credit unions with more than $1 billion in assets, but its average share balance of $13,574 was 8% lower. With the Fed poised to raise interest rates in 2022 and consumer spending likely to draw down deposits, Field forecasts an even more competitive landscape.
“I fully expect our balance sheet will be in a situation where we will be competing for deposits by 2023,” Field says. “We have to start thinking in terms of what we are going to do to retain deposits and continue to grow them without paying a premium.”
Changing Culture
One key strategy, according to CEO Miller, is to align VSECU’s culture with its values, mission, and brand.
“If we’re going to be truly effective and authentic, we have to reflect our values and impact,” Miller says.
The credit union also needs to live its mission if it’s going to stand out in the market, says Yvonne Garand, senior vice president and marketing and business development officer at VSECU.
“Banking can be something greater than just people using their debit card, getting a mortgage, or getting a car loan,” Garand says. “We demonstrate that, through the act of banking, people can collectively make impactful change in our society. That really is the key differentiator for us.”
Rather than simply cutting checks for charity, VSECU partners with community groups and encourages employees and members to actively participate in programs to feed the hungry, provide winter heating fuel to needy families, and invest in local business startups, cooperatives, and green energy firms, Garand says.
“We’re mobilizing our entire membership in the communities we serve,” the SVP says.
Miller was an outsider to the credit union industry when he took the job at VSECU in 2014, but he says that helped pave the way for new ideas. He had held various positions at Citibank, Dwight Asset Management, and Conning and also had served as commissioner of the Vermont Department of Economic Development from 1994 to 2000 under Gov. Howard Dean. Miller says his background in both the public and private sectors helped him question age-old practices at VSECU. He also joined the boards of nonprofits aligned with the credit union’s mission including the Vermont Council on Rural Development and the Energy Action Network, which works to achieve Vermont’s commitment to 90% renewable energy by 2050.
One of his first most-visible changes was to foster an environment of empowerment within the credit union and its employees. He intentionally introduced various new disciplines to create space where the people closer to the work had a greater influence in decision-making. For several years, the credit union focused on a cultural transformation that empowers employees within VSECU operations.
At the time, he recalls, VSECU was a traditional hierarchical organization. That’s changed in the years since.
“We’ve tried to be a much more inclusive organization,” Miller says. “A lot of that is based on our participatory values as a member-owned co-op, but also we believe that having more people around the table leads to better decisions.”
VSECU’s culture of inclusive decision-making is still fairly young, says Garand, but it’s already making strides in pockets across the organization, from member services to marketing.
For example, in a major project to revamp VSECU’s website, instead of leaving the project solely in the hands of the marketing department, the project team included employees from across the organization with a stake in the new website and user experience. The project kicked off with stakeholder interviews that helped shape the project for future development.
“The people within the working environment create this space for great things to happen, and it’s this culture that brings the brand to life,” Garand says. “Our culture is about being inclusive and belonging. When we look at the 180 to 200 people who work at VSECU, we embrace differences and different points of view. Surrendering your own knowledge and expertise, accepting different points of view, and getting comfortable with it is what we call ‘VSECU tension.’”
The word “tension” often carries a negative connotation, but when a team freely processes tension, it leads to innovation, the marketing executive says.
“The more inclusive we are, the higher performing we will be as a credit union and the better we will be in meeting the needs of our members,” Garand says.
Miller agrees.
“Culture is vitally important,” Miller says. “It might be the most important thing we’re focused on because it enables us to accomplish so many other things.”
Looking To The Future
VSECU celebrates its 75th anniversary in 2022, but the credit union is more likely to be looking toward its future than reveling in its past. It aims to continue growing its VGreen programs and is talking with other credit unions to share its knowledge of emerging green energy lending practices. Miller says that cooperation could lead to joint ventures outside of the state and advance VSECU’s goal of making a true impact on global climate change.
At the same time, the state is implementing rules for recreational cannabis sales, approved in 2021 by voters in Burlington, Montpelier, and at least 16 other towns. As the only financial services firm in Vermont providing banking services to the medical cannabis industry, VSECU’s experience will likely prove valuable as lawmakers implement the program in 2022.
And with COVID-19 numbers waning, employees are settling into a new normal workplace, with some working in the office, some working remotely, and others on hybrid schedules. Regardless of desk location, VSECU will focus on engaging employees and fostering an inclusive culture.
Likewise, it will foster an inclusive environment for members who chose to bank remotely. The credit union expects consumer adoption of digital banking services, which accelerated during the pandemic, to continue to increase, posing a challenge to any institution that delivers personal service through a branch.
“The good news is technology allows us to become a lot better at using information and data in our systems about our members,” Miller says. “We’re increasingly focusing on how we can use that to make the member experience better.”
Branches will not go away, Miller predicts, but they will change.
“Their role is changing from what historically has been centers of transactions to centers of advice, counseling, engagement, and relationship-building as well as a projection of our brand in the community,” the CEO says.
For more than a decade, VSECU’s main goal has been to fulfill its vision to serve the entire state of Vermont. As the credit union looks to the next decade, its horizon is even broader.
“We built branches, we developed products and services to meet needs, and we spent down capital; I think we’re seeing some of the benefits of those decisions,” Miller says. “Now, it’s time for the next leg of the journey. That’s what we’re focused on today.”
This is part of the “Anatomy Of A Credit Union” series, presented every quarter by Callahan & Associates. Read more about VSECU or dive into a decade of archives. Contact Callahan to learn about gaining access today.