Haverhill Bank, whose headquarters are shown above, is planning to merge with Northeast Community Credit Union.

There’s no love lost between bank and credit union trade groups, which represent two competing sectors in a competitive industry.

But what the associations say and what their members do can be very different – as evidenced late last month, when the $165 million Haverhill Bank and the $98 million, 10,000-member Northeast Community Credit Union announced plans to merge.

It’s the first time this type of transaction has gotten to this point – the boards of both institutions have approved it, and a formal application is expected to be filed with the state Division of Banks within 60 days – despite the fact that state law has allowed it since 1992, according to Stanley Ragalevsky, a lawyer with the Boston firm Kirkpatrick & Lockhart Preston Gates Ellis, who is representing the bank in the proposed merger.

“Bank and credit union mergers are very rare,” he acknowledged. “In part it’s legal issues, and in part cultural.”

But even though the two types of entities “have been going after each other for years,” Ragalevsky said, his client and NECCU “have the same mission” – and are thus a natural fit.

NECCU President and Chief Operating Officer Peter Di Benedetto confessed last week that he was “tired” after working with lawyers on the complicated process that will allow the two institutions to merge.

He said NECCU board members did have concerns about cultural differences that could arise, such as perceived differences in mission or the constant rankling between banks and credit unions over credit unions’ tax status, “but community spirit here is very strong.”

The idea of keeping Haverhill money in Haverhill, he said, was the deal-maker.

“These boards know each other,” added Michael Hanson, a former Massachusetts bank commissioner who is NECCU’s attorney in the transaction. “To the Haverhill community, this is two longstanding institutions that are going to serve Haverhill.”

Both institutions had been approached by larger banks or credit unions about merging, their presidents said. Both rejected them.

“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,” explained bank President Thomas Faulkner. The more capital a bank has, the larger a loan it can make.

Faulkner said his bank and NECCU – along with many other community banks – are faced with the same crushing cost challenges these days, and limited means to address them.

“Obviously, there’s been a lot of discussion among many community banks about mergers,” he said. The infamous “flat yield curve” – when short- and long-term interest rates converge – increased competition from Web-based banks and others with less overhead, minimal lending activity and the cost of compliance are huge financial burdens to banks or credit unions, he explained. With less money coming in, those that spend more – as they must, to address such issues – have to offset the costs somewhere else.

‘Business as Usual’

Di Benedetto said he worked the Saturday after the proposed merger was announced so he could assess members’ reactions. A portion of them, as well as Haverhill Bank depositors and a slew of state and federal regulators, must still approve it before it can proceed.

“I told them that [with a merger] only one of us will have to deal with compliance costs – and because of that, we’ll be able to offer better interest rates,” he said. Customers found that attractive, he noted.

But their main concern, he said, was whether their account numbers would change.

“I told them, ‘No, it’s business as usual. You’ll just have more locations to go to,'” he said. Each institution has three locations in Haverhill.

When they think about it, Di Benedetto said, most credit union members are OK with the merger plans.

But Robert Kimmett, senior vice president of public relations and marketing at the Massachusetts Credit Union League, was more circumspect.

Noting that if the merger is approved, the combined institution will be chartered as a bank, Kimmett warned that banks are one step closer than a credit union to being converted to stock-owned: companies whose interests are governed by profit-seeking stockholders rather than members.

“If [the membership] decides they want to change their means of ownership, we won’t oppose that,” he said. “But I am not convinced that the members truly understand Â… what they lose: the ability to have a direct impact on how their credit union is governed.

“The fact that [Haverhill residents] still have credit union choices available to them is a good thing,” he added.

Massachusetts Bankers Association Director of Communications Bruce Spitzer sees the merger as a good thing.

“We think it makes perfect sense,” he said. “If you’re going to run an institution which is for all intents and purposes a bank – but doesn’t pay taxes – why not make it official?”

Banks pay corporate income taxes, while credit unions do not.

Some believe credit union regulators or others will oppose the merger of NECCU into a bank, Faulkner said – either because the combined institution will have to pay taxes or because they may feel its mission is compromised.

“But taxes only mean something if you’re making money,” he pointed out. “And if this is the best thing for customers, the community and members, I don’t see why they would have a problem.”

Faulkner, who’s 64, plans to stay on as chairman and CEO of the combined bank, assuming the merger takes place, as both parties hope, by the end of the year.

Di Benedetto, 59, will be president and chief operating officer at the start but plans call for him to succeed Faulkner within the next couple of years.

The 11-member NECCU board and 15-member Haverhill Bank board will combine to a new board with nine members from NECCU and 11 from the bank. The credit union’s board is currently comprised of volunteers; all new board members will be paid.

Faulkner and Di Benedetto said that neither layoffs nor branch closings are proposed in the merger of the two institutions, which together employ 85 people.

Others in the industry say mergers always involve some higher-level managers losing their jobs, but the bank and credit union plan to rely on attrition and combining job functions to cut costs, Faulkner said.