A bank and credit union merger in Haverhill announced last summer isn’t going as fast as some in the local banking community had expected.
Some say that’s because credit union regulators don’t want credit unions to leave the industry’s fold. But those most directly involved in the planned joining of the $98 million, 10,000-member Northeast Community Credit Union and the $165 million Haverhill Bank say the explanation is simpler.
“This is uncharted territory,” said Peter Di Benedetto, chief executive officer of NECCU. While state law has allowed banks and credit unions to merge since 1992, the Haverhill pairing is the first that actually has happened here, he and others explained.
The Federal Deposit Insurance Corp. – Haverhill Bank’s insurer and regulator – as well as the National Credit Union Administration, which insures NECCU, and the state Division of Banks must approve the deal for it to happen. To date, only the FDIC has given the go-ahead.
NCUA spokesman John McKechnie said there have never been any mergers exactly like that of NECCU and Haverhill Bank.
“This is a somewhat convoluted area of the law,” he said. He noted that NCUA only received it on Jan. 15, and said he could not give a time frame for how soon the present application might be approved.
The agency presently is considering new regulations that would govern, among other things, conversion of a federally insured state credit union to a mutual bank. But McKechnie said it will rely on current statutory requirements in deciding upon the current proposal.
NCUA’s Web site states that the new rules are being adopted to “protect member interests in transactions where members have a great deal at stake, because the transactions involve Â… in come cases, termination of a credit union charter.”
In the Haverhill/NECCU merger, NECCU would take on the charter of Haverhill Bank. The bank is one of Massachusetts’ oldest mutuals, noted its attorney, Stanley Ragalevsky of Kirkpatrick & Lockhart Preston Gates Ellis.
Credit union members voted 77-1 to approve the merger at a public meeting in Haverhill last fall, he added, but NCUA has indicated it also wants a mail-in vote.
NCUA’s apparent caution is consistent with its general reluctance to have credit unions “leave the fold,” according to Kevin Handly, a banking attorney with Pierce Atwood in Boston. There are valid reasons for that, he said: There could be conflicts of interest when a credit union converts or merges into a bank, in that credit union “insiders” could stand to benefit financially if a credit union converted or merged into a bank, and the bank later converted to stock-owned.
Credit unions also give up their corporate tax exempt status – a significant benefit if they give up their charters, Handly added. NCUA simply wants to ensure that the transaction will benefit credit union members, he said.
Di Benedetto and Haverhill Bank President Thomas Faulkner have noted that their institutions mesh well culturally, and have said that an additional benefit in the merger is that funds in both institutions will stay local.
“Frankly, one of the deciding factors was that between the two of us, we had $30 million in capital and we thought we should keep it in Haverhill,” bank President Thomas Faulkner told Banker & Tradesman last July. Faulkner could not be reached for comment for this story.
Massachusetts Division of Banks General Counsel Joseph Leonard said DOB is waiting to see what information NCUA will request in its approval process. Then, he noted, Bank Commissioner Steven Antonakes will have a better idea of DOB’s timetable for approval.
DOB received four comments in favor of the proposed merger, from Haverhill’s mayor and other state and local officials, before its comment period closed Jan. 10.
