In the year since Haverhill Bank and Northeast Community Credit Union merged – a move decidedly against industry norms – they say they’ve celebrated a strong union, retaining most former credit union members as bank customers. But the first year of marriage wasn’t without its rough patches.
Despite the unusual nature of the merger, which saw two traditional adversaries come together in a Massachusetts first, Haverhill Bank has seen troubles typical of banks in 2009: Loan delinquencies have seesawed. The bank voted to close a branch in June, and took a $900,000 loss for the move. It streamlined operations, trimming a dozen jobs through attrition, but avoided layoffs.
Most recently, however, it lost its COO and president, who was the CEO of the former credit union.
‘A Different World’
Peter L. DiBenedetto stepped down officially on Dec. 1, saying he had career opportunities elsewhere. But Thomas R. Faulkner, Haverhill’s CEO and interim president, adds – and DiBenedetto acknowledges – that banking’s regulatory strictures were tough for a former credit union executive to get used to.
“My impression is that banking regulators are much more enthusiastic and vigorous, and credit unions’ regulators understand that credit unions are probably more people-oriented – and [the regulators] try to make the regulations work,” Faulkner said.
But for a credit union executive, “it’s a different world,” he said.
Stephen J. Coukos, a partner with Boston-based Chu, Ring & Hazel, said it’s often easier for a banker to go into credit unions than the other way around.
“That doesn’t surprise me,” he said, echoing Faulkner’s statement. “There’s a real difference, going from a credit union to a bank.”
Faulkner says DiBenedetto stayed long enough to assure the merger went well. About a dozen jobs have been cut through attrition this year, he said.
And few former credit union members have left, he says. For that, both Faulkner and DiBenedetto credit their work in smoothly blending staff for the two institutions, which kept customers and former members seeing familiar faces at their local branches.
Deposits, however, have slumped. As of the end of 2008, Haverhill Bank had $215.3 million in deposits, but only $208 million as of the end of September, according to FDIC data.
Faulkner said those deposits went down as part of a bank strategy: Most of the lost deposits were customers holding higher-interest CDs. The bank stopped aggressively pricing its CD rates to winnow out the “expensive money,” and has since improved the cost of money. Regular savings and checking accounts, he said, have meanwhile gone up by several million.
Bank analysts, including Coukos, affirm that acquiring institutions occasionally follow that strategy: The acquiring bank will decide that it doesn’t want higher-interest rate depositors, and so will siphon them out.
Loans, meanwhile, present a mixed picture for the bank. According to the FDIC, the bank made progress in loans less than 90 days past due, dropping from $9.3 million in such loans at the end of 2008, down to $1.3 million last quarter. However, loans in nonaccrual status – those that are well past 90 days overdue and unlikely to be fully recovered – stand at $4.2 million as of September, almost double what they were in the second quarter.
Faulkner says he’s pleased with the merger’s aftermath, which is no small statement. The merger itself took two years to complete, and required a heavy workload. Both boards had to accept the merger, while the credit union had to appease their regulators by mailing ballots to every member of the institution.
Still, he said, “It’s something I would do again.”
