HAVERHILL, Mass. -
Thomas Faulkner, president and CEO of Haverhill Bank, said what some in the credit union movement see as a back-door conversion to bank does not fit the framework of what has gone before, even though his lawyer is also working on another typical conversion to bank. The two neighboring financial institutions, said Faulkner, have many of the same depositor/members, are both troubled by the local economy and have flat growth, and even have many of the same community leaders sitting on their respective boards. "Some of them even went to high school together," said Faulkner.
The $130-million savings bank, he insists, has no intention of a quick cash-in through an initial public offering and plans retain all of the credit union's employees and management. Peter Dibenedetto, CEO of the $96-million credit union, will be the likely successor as head of the combined entity, said the 65-year-old Faulkner.
In addition, both institutions are struggling. Northeast Community CU eked out a $347,000 net for the first nine months of the year, while Haverhill Bank fell slightly into the red for the third quarter, due to merger-related costs, according to Faulkner. "Without the merger, we would have been in the black, but just barely," he said. Both institutions reported slight or no deposit growth for the first three quarters.
But regulators are still mulling the rare merger, the first switch from credit union to bank since the state passed enabling legislation two years ago. The FDIC has approved the deal, while the Massachusetts Department of Banking is reviewing an application. NCUA, which must also review the unusual combination, has yet to receive a merger application.
NCUA, according to sources, is concerned that the credit union did not undergo the stringent disclosure and mail balloting process it requires for conversion to banks. An NCUA official said last week the agency has been talking with lawyers for the two institutions. Any application, the official said, will be reviewed within the scope of the agency's merger rules to determine whether the rare combination meets the "convenience and needs" of the credit union members.
"We're working with them and trying to come up with some reasonable process," said Faulkner, of the federal credit union regulator. "There is no process established. They have concerns about member input," adding that they believe the deal is a straight merger and should be reviewed as such, and should not be viewed the same way as a conversion to savings bank.
Northeast Community is being represented by former Massachusetts Banking Commissioner Michael Hanson, a lawyer for the Massachusetts CU Insurance Corp., who is also representing Community CU of Lynn, a nearby Massachusetts credit union that is converting to mutual savings bank.
The rare combination was overwhelmingly approved in September by owners of the two neighboring institutions. Just one of 78 members attending a special meeting for Northeast Community CU voted against the merger and he was the son of a former president of the credit union. About 98 depositors of Haverhill Bank voted unanimously at a special meeting for the merger.
