Mergers Move East
For months it has been the sand states getting all the merger attention. But last week’s consolidation move by the $2.6 billion Visions FCU, Endicott, N.Y., to take over the long-ailing $330 million Paragon FCU in New Jersey shifted the merger focus to the Mid-Atlantic.
While the significance of Visions’ first-time expansion into northern New Jersey, highlighted by a bidding procedure begun in April as a result of NCUA prodding could not be understated, there were two more East Coast merger deals unveiled.
In New Jersey, the $256 million McGraw-Hill FCU of East Windsor said it is completing a merger this week of the $8.5 million St. Vincent’s Employees FCU of New York City as part of a long-range plan to expand into the health care field.
“This is our first merger but we see this expansion as part of strategy to diversify our membership as look at other SEG groups for embedded growth,” explained Shawn Gilfedder, McGraw-Hill president/CEO noting the St. Vincent’s CU “came to us a year ago” when their primary sponsor, a noted Manhattan hospital, closed its doors last year.
As a result of the merger of a healthy CU, the New Jersey CU can piggyback the medical know-how into adding other SEG groups in Manhattan involved in the growing fields of health insurance and biopharmacy, said Gilfedder, who also is chairman of the New Jersey Credit Union League.
Meanwhile, the $700 million Franklin Mint FCU of Broomall, Pa., is making plans to merge the $21 million Sentry FCU of Brookhaven marking Franklin’s second merger in a year in cases involving sponsor overlaps.
“We’ve had two cases now in which smaller credit unions facing the compliance burden and member overlaps with sponsors have come knocking on our door inquiring about a merger,” said John Unangst, president/CEO, noting his CU has been ready to step in “where it makes sense.” Under the Sentry transaction, slated to go into effect in the fourth quarter, Franklin Mint will retain 33 Pennsylvania branches.
Apart from McGraw-Hill and Franklin, however, the consolidation by New York’s Visions FCU of Paragon in New Jersey served up once again the travails of some regional CUs buffeted by the recession and large real estate-related loan losses.
“Yes, they were a CAMEL 4 or 5 credit union, which suffered when the real estate market turned negative,” explained Frank E. Berrish, president/CEO of Visions, which numbered among some 40 CUs across the Northeast which last April received a so-called RFP letter.
The call to make a bid on Paragon was initiated by the CU’s lawyers, said Berrish. Sources said it apparently followed the NCUA suggestions that the Montvale, N.J., CU seek out merger partners after it sustained a $8 million loss last year and most recently had 3.18% net worth. In the first half of 2011, Paragon lost $489,000.
In taking over Paragon, Visions said the transaction serves to extend the central New York’s reach into growth-rich northern New Jersey suburbs.
Visions, the former IBM CU, said the Paragon merger would permit the CU to land new loan business and reach out to a more youthful demographic. Berrish described the Endicott market as “heavy with savers and in an area losing families.”
“We believe the business in that part of New Jersey is more robust.”
Although Visions has weathered the recession in good financial shape, said Berrish, the opportunity for loan growth in its home market remains weak.
Visions also has had positive experience in mergers completing a year ago a consolidation in Rochester of the $2 million Progressive Neighborhood CU.
“We’ve seen those assets climb to $24 million today,” said Berrish, maintaining his CU was able to offer an expanded product and service line to eager members.
Under the Paragon deal adding six branches, Visions will end up with 29 branches New York, New Jersey and Pennsylvania, with more than 166,000 members.
The president/CEO of Paragon, John S. Fiore, will be leaving the CU next January under a previously set transition schedule, said Berrish. He said he could not comment on any change in staff levels as the CU completes its due diligence procedures.