PenFed to Acquire Credit Union on Long Island

Pentagon Federal Credit Union will expand to Long Island by acquiring Sperry Associates Federal Credit Union, whose CEO had, as recently as July, written about the continuing viability of medium-sized credit unions.

Sperry ($265.4 million in assets, 16,303 members as of Sept. 30) announced Monday that its members had approved the merger in September. Its website said the merger will be complete Dec. 1, and its phone message said Tuesday that “eligible members” should have already received their $350 “member merger dividend.”

Based on its total membership, the dividend could cost up to $5.7 million.

The single-office credit union is at 2400 Jericho Turnpike in Garden City Park, N.Y. — about 12 miles northeast of John F. Kennedy International Airport and about 20 miles east of PenFed’s Penn Station Service Center branch in Manhattan. Sperry bought the property for $1.1 million in January 1996.

PenFed of Tysons, Va. ($26.3 billion in assets, 2.1 million members as of Sept. 30) had 51 branches as of June 30. Its four New York branches included two at West Point and two in Manhattan.

Kevin J. Healy, Sperry’s CEO and vice chair, said in the news release that the merger with PenFed serves as the successful culmination of a decades-long financial recovery for the institution.

“We’re looking forward to this new exciting chapter in Sperry’s history,” Healy said. “The merger will allow for our members to have enhanced access to a variety of products and services thanks to PenFed’s robust offerings.”

NCUA records showed Sperry had seen its margins run thin from the summer of 2019 through June 30. Its quarterly returns on average assets had ranged from a low of 0.03% in 2019’s third quarter to a high of 0.24% in this year’s first quarter, before falling to 0.14% in the second quarter.

But results for the third quarter showed a large rebound, with ROA rising to 0.60%. Its net worth ratio stood at 8.42% as of Sept. 30, up from 8.05% in June and 8.33% in September 2019.

In the news release, Healy said the board’s desire to merge was shaped by changes in financial services. The entrance of large technology companies in the crowded financial services market was making it more difficult for mid-sized institutions like Sperry to gain market share.

“Sperry is currently well-capitalized,” Healy said. “The board of directors felt that now was the time to leverage the resources of a strong partner like PenFed while Sperry is financially competitive.”

Sperry’s news release cited the merger trends that have reduced the number of banks and credit unions, while increasing their average size. Since 2016, the NCUA has approved an average of nearly 200 credit union mergers per year.

“Locally, Long Island typically reflects nationwide trends, so it is highly likely that we will see more merger activity in the coming years,” Healy noted. “For over a decade, Sperry’s board and executive management team has worked to successfully strengthen the credit union’s standing, and this is the next step in that process.”

As of June 30, the nation had 5,275 credit unions with $1.53 trillion in assets and 119 million members. Of them, there were 4,454 credit unions with less than $340 million in assets, representing about 15% of the assets and 20% of the members of the credit union movement, based on an analysis of NCUA data by CU Times.

Sperry was formed in 1936 by employees of the Sperry Gyroscope Co., a company founded in Nassau County in 1910. Among other products, it built bomb sights for airplanes during both World War I and World War II. The company was acquired by other companies in 1986. Its field of membership expanded to Nassau County.

The Long Island credit union’s decision to merge with PenFed came after a column by Healy published July 17 in CU Times, in which he extolled the virtues and staying-power of mid-sized credit unions.

“At Sperry,” he wrote, “we’ve found a happy balance in maintaining the services and products our core members love such as free checking and competitive loan rates, while at the same time offering niche and specialized lending products that match emerging needs.”

“These products were the direct result of Sperry taking advantage of its market positioning,” he wrote. “We’re a mid-sized credit union, member-owned and proudly serving the Long Island market for over 80 years. While we like to think bigger, we also act on the local neighborhood level.”