The courtship and close ties between two mid-size Maryland credit unions, Educational Systems FCU and the ailing Montgomery County Teachers FCU, have been ongoing for years but “really in the last week they accepted our proposal” for a merger, according to Educational Systems’ president/CEO Chris Conway.
“We realize that Montgomery County suffered that capital hit a few years ago and has made progress coming back but we also know this is really a perfect match – the same educational membership, next-door neighbors and we operate on the same wave length,” Conway said of his $367 million institution.
He said the parties quickly came together in signing a letter of intent after an original proposal submitted several months ago went unanswered from the Montgomery management and board.
“I think we received a courtesy letter from them politely recognizing our offer but that was it,” recalled Conway.
It was well known, sources said, that the $384 million MCT for years had been under the watchful eye of NCUA examiners after it suffered large losses in its secondary mortgage portfolio, though it was unclear how much merger shopping may have been done. MCT lost $739,000 last year on top of a $6 million loss in 2010 and has a net worth ratio of 4.4%.
Rockville-based MCT had taken on a large portfolio of HELOCs, secondary mortgages and unsecured loans, experiencing large losses when the Maryland economy and real estate took a nose dive several years ago.
Conway stressed that Educational Systems will be doing its due diligence but anticipates no problems on a merger which might take a year to complete once member and regulatory approval is received.
“Let me add this is not a deal brokered by NCUA,” said Conway.
“I’ve worked on many things with Thom and I know their staff and some of their board,” said Conway, who was a lending officer and then vice president of finance at MCT when he left the CU to join Educational Systems as chief operating officer in 1998.
Thom Beck, president/CEO of MCT, will become a vice president under the merged credit union, Conway said.
In citing the partnership ties, Conway noted that he and Beck are both directors of an indirect CUSO, Credit Union Auto Loan Network, based in Linthicum and with 15 credit union owner/participants.
In another example of close ties, the credit unions are located within 25 miles of each other in neighboring counties. Educational Systems is headquartered in Greenbelt in Prince George’s County and has field of membership that includes four other Maryland counties: Charles, St. Mary’s, Calvert and Talbot.
On another topic, Conway told a Credit Union Times interviewer that he remains a strong credit union advocate, adding “I’m still scratching my head” on the Maryland-based $183 million HAR-CO Maryland FCU’s impending move to become a mutual bank. The Bel Air credit union, located north of Baltimore, has said it had hoped to become a bank by April 1, though a spokeswoman said Friday “we’re just waiting.”
Concluded Conway, “that is their prerogative but I see growth as a credit union. We have a better story to tell.”