Parke Bancorp's small business lending venture was so successful that it eventually outgrew its parent company.
The $865 million-asset Parke, which teamed with a group of lenders in August 2009 to form 44 Business Capital, could have tried to manage a unit that has closed more than $200 million in Small Business Administration loans since its creation.
Instead, the Washington Township, N.J., company chose to part ways with the fast-growing business, agreeing to sell it to the much larger Berkshire Hills Bancorp in Pittsfield, Mass. The sale, expected to close early next year, links the SBA unit to a $7.8 billion-asset company that, in the past decade, has built on its deep roots in western Massachusetts to forge a regional franchise with operations in Connecticut, Vermont and central New York.
For Vito Pantilione, Parke's president and chief executive, the time had come to monetize on a successful endeavor that was poised to go nationwide. "We took advantage of the value of a company we built … while we continue to focus on a regionalized SBA program," he wrote in an email.
For comparative purposes, 44 Business Capital has expanded in the last six years from its Philadelphia-area base to provide loans to businesses in Baltimore, Washington and northern Virginia, while Parke has only opened one branch in a town that is less than an hour's drive from its headquarters.
Parke is at least the second company in the past month to sell a successful, rapidly growing business to a larger bank.
United Community Banks in Blairsville, Ga., agreed last month to sell its corporate health care lending unit, along with $190 million of loans, to the $21 billion-asset Hancock Holding in New Orleans.
Lynn Harton, the $9.4 billion-asset United's president and chief operating officer, said in a press release announcing the sale that the unit's lenders would be better served operating under a larger corporate parent.
"Our talented team in Nashville has built a strong portfolio, but the business is better suited for, and will be more successful in a larger bank," Harton said.
Parke, powered by 44 Business Capital, generated $53.4 million in SBA 7(a) loans in the fiscal year that ended Sept. 30. Berkshire's 7(a) loan volume was $25 million.
Parke has been a "great partner over the past six-plus years," Greg Poehlmann, 44 Business Capital's president, said, though he is clearly excited about the chance to work with Berkshire. "We've met the team at Berkshire and we're extremely impressed with their vision," he said.
Poehlmann said he expects to create quick and significant synergies between his firm and Berkshire's Firestone Financial equipment-finance unit, as well as its asset-based lending operations. "They understand specialty finance," he said.
"We're not necessarily your father's 7(a) lender," Poehlmann added. "We've done deals where there's been an ABL facility along with a 7(a) facility."
The addition of the 44 Business Capital team meshes nicely with Berkshire's drive to attract bankers who can manage all parts of a complex client relationship, said Peter Rice, Berkshire's senior vice president for business banking.
The SBA group has plenty of experience with complex deals. It structured an $11.8 million commercial real estate loan in April 2014 that let a client, a manufacturer in Bensalem, Pa., buy a 400,000-square-foot factory.
"People really want to sit down with bankers who are knowledgeable about business," Rice said.
"They don't want to be passed from person to person," Rice added. "The team at 44 Business Capital speaks manufacturing. They speak hotel. They speak retail. They're fantastic guys and what impressed us the most was the interest they take in people."
Parke's sale of 44 Business Capital may well result in a short-term reduction of noninterest income, since the unit was responsible for the lion's share of the more than $17 million the company has realized since 2009 by selling the guaranteed portions of 7(a) loans.
Berkshire plans to let 44 Business Capital operate as an autonomous business unit, maintaining a relationship the business has had with Parke.
Berkshire, meanwhile, had never had a subsidiary operate separate from its bank before this year. Firestone, which the company bought in August, also retained its name and separate identity.