Beacon Federal in East Syracuse, N.Y., is using its old ties to the credit union industry to fuel its growth.
Many banks expand by acquiring other banks, but the $539 million-asset Beacon Federal targets credit unions, persuading them to convert to mutual thrifts and then acquiring them as soon as the conversions are completed.
Beacon, which was a $170 million-asset credit union before converting to a mutual savings bank in 1999, has closed three such deals since 2000 and has a fourth in the works. On June 29 the $23 million-asset Marcy Federal Credit Union filed an application with the Office of Thrift Supervision to convert to a mutual savings bank and then sell itself to Beacon.
The price has not been disclosed, but the acquisition easily would be Beacon's largest since its own conversion.
Caney Fork Cooperative Credit Union of McMinnville, Tenn., had just $300,000 of assets when Beacon bought it in 2000. A year later, Beacon acquired the $1.1 million-asset Professional Teachers Credit Union, also in McMinnville. In 2003, Beacon bought the $8 million-asset Salt City Hospitals Federal Credit Union of Syracuse, N.Y.
Ross Prossner, Beacon's president, said its status as a former credit union helps it develop a rapport with acquisition targets.
"It's a case of us being a former credit union and sharing a lot of the same philosophies of their members," he said.
Ultimately, though, credit unions team up with Beacon Federal because it makes good business sense, he said.
"In each of those cases, you're talking about much smaller institutions," Mr. Prossner said. "By merging with us, they get to take part in all of our products and services."
Walter Kapinos, Marcy's president, said he would not discuss the conversion until regulators have made their decision on the application.
Beacon's acquisition strategy is unusual, but not unheard of. In 2001, Roper Employees Federal Credit Union in Charleston, S.C., converted to a mutual savings bank before selling itself to Carolina Federal Savings Bank, also of Charleston.
Richard Garabedian, a partner at Luse Gorman Pomerenk & Schick PC in Washington, said the cost of converting is the main reason small credit unions looking to become thrifts team up with larger institutions.
"The smaller the credit union, the more difficult it would be to undertake a conversion on its own," he said.
Alan Theriault, the president and chief executive officer of CU Financial Services, a Portland, Maine, consulting firm that advises credit unions on converting to thrifts, said he expects the trend to accelerate.
The National Credit Union Administration has proposed new rules that would require converting credit unions to send out more disclosure notices to members. Mr. Theriault said the rules could drive up the cost of conversions.
"It's not a big deal for a billion-dollar institution," he said. "But if you're talking about a $100 million credit union, it'll take six months to a year to pay for one of these conversions."
Moreover, Mr. Theriault said, shrinking margins are putting intense pressure on many small credit unions, and merging with either thrifts or other credit unions could be their only hope for survival.
"Beacon is a prototype of what we are going to see throughout the credit union industry, because there is going to be an acceleration of mergers," he said.
Beacon has five branches in New York, Tennessee, Texas, and Massachusetts. The branch dispersion is rooted in the institution's history as the credit union that served employees of the air conditioner maker Carrier Corp., which had offices in those states.
Last year Beacon had net income of $4.3 million and a return on equity of 12.41%, according to Federal Deposit Insurance Corp. data. For the first half of this year it earned about $1.8 million.
