Haberling Financial Group is merging its wealth management business into a newly-formed subsidiary of Community First Bank in Kennewick.
[blockquote quote="We are the only locally-owned bank in the Tri-Cities and we will now be the only locally-owned trust company." source="Eric Pearson, president of Community First Bank" align="right" max_width="300px"]
The transaction is subject to regulatory and shareholder approval, which are expected by the end of the year.
The subsidiary will be a trust company chartered by the State of Washington. Haberling Financial Group will become known as HFG Trust, which will be owned by Community First Bank. Therefore, all current Haberling employees, including Haberling, will become employees of HFG Trust, said Ty Haberling, the president and founder of the Haberling Financial Group. Haberling started the business in 1983.
The company is a registered investment advisory firm managing more than $325 million in assets.
Haberling said that over the past decade, as the company’s clients have aged and amassed wealth, many of them need trust services that as a Registered Investment Advisory firm, Haberling was unable to provide due to federal regulations.
“Thus, we felt it didn’t make any sense to refer our clients that needed trust services to a different institution at a potentially emotional or challenging time,” Haberling said.
A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary. Trusts are traditionally used to minimize estate taxes, but can offer other benefits to an estate, such as control of wealth, protecting a legacy, privacy and probate savings.
So Haberling began looking at forming a trust company and determined it made more sense for the company to partner with Community First Bank. Haberling is a founding board member of Community First Bank and said he would not have worked with any other financial institution on the deal.
“The bank brings capital, a strong leadership team and a respected relationship with regulators, as well as technology expertise,” he said.
The merger will be seamless for clients and there will be no physical changes, he added.
“We will be in the same office location with the same staff,” Haberling said. “We will continue to provide the current services of wealth and portfolio management; however, for those clients that need trust services, we’ll be able to satisfy that need, as well.”
Haberling said there was no cash involved in the merger, but they determined the value of Haberling Financial Group and Haberling received bank stock in that amount.
Haberling said the merger allows HFG Trust the autonomy to grow its business in a way that benefits both HFG clients and Community First Bank shareholders.
Eric Pearson, president of Community First Bank, said he is excited to be able to add wealth management and trust services to the bank’s product mix.
“The merger with Haberling and creation of HFG Trust will allow us to more fully serve both ours and their existing and future clients,” Pearson said. “We are the only locally-owned bank in the Tri-Cities and we will now be the only locally-owned trust company.”
Pearson said the expansion of services will allow Community First Bank to grow while maintaining its focus on the Tri-Cities’ community.
“Additionally, this move allows us to diversify our revenue mix, making earnings less sensitive to changes in interest rates,” Pearson said.
Haberling said that being a locally-owned trust company should give clients peace of mind. A trust company is held to a higher standard of federal oversight than investment advisory firms, undergoing annual physical audits by the Securities Exchange Commission, or SEC. Trust companies also operate under a different set of rules than investment advisory firms, Haberling added.
“Because we are a trust company, we are required to do what is in the client’s best interest,” he said, instead of just what ‘might be suitable’ in a situation.
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