| As he looks forward to the bank completing its planned merger with Fidelity Bank, Cape Cod 5 CEO Matthew Burke thinks it is essential for smaller banks to look at mergers and partnerships to survive the pressures of a high-interest rate economy.
In an email to Banker & Tradesman, he said it was “incredibly” important that the two banks merge holding companies at this time as it is difficult for smaller banks to stand firmly against economic headwinds. The merger is expected to be finalized in the second quarter of 2024.
“The banking industry and economic landscape have really changed, and many smaller banks need to scale to survive,” Burke said, noting that Cape Cod 5 will take the leadership role in the partnership.
“This came together over the course of many conversations over recent years. Cape Cod 5 has been very successful with organic growth, and while we will continue down the path, the pressure on the banking industry makes that challenging. We believe this is a great opportunity to continue to grow and leverage our people and resources, rather than having to cut back due to the industry pressures,” he added.
The Federal Reserve raised interest rates 11 times since last year. It paused hiking rates this month but its leading policymakers have indicated they intend to hold the central bank’s benchmark interest rate steady at its current level for some time.
The high-interest rate environment makes it harder for banks as loans become more expensive, thus discouraging borrowing, and deposit rate payouts become more costly.
Burke said the partnership will expand both banks’ geographical coverage and customer base – combining Cape Cod 5’s areas on the Cape and Islands and Southeastern Massachusetts with and Fidelity Bank’s branches in Eastern and Central Massachusetts.
It will also help the two banks with “risk mitigation,” allowing them to help each other take on more and bigger loans. It will also enable the two banks to offer business lines unique to one bank to customers at the other bank.
He said the banks’ operations and customer relationships will not be impacted, and there will be no branch closures nor layoffs.
Previous mutual holding company mergers in Massachusetts include Dedham Savings and South Shore Bank joining forces earlier this year, Newburyport and Pentucket banks partnering at the end of 2022, and Abington Bank, bankESB, and bankHometown forming Hometown Financial Group in 2015.
