The Depositors Insurance Fund and the Co-operative Central Bank see their proposed merger as a way to increase efficiencies for member banks.
A proposed merger between two funds that insure excess deposits at Massachusetts savings and cooperative banks could happen later this month.
Legislation to combine the Depositors Insurance Fund and the Co-operative Central Bank has been approved by Massachusetts lawmakers and Gov. Charlie Baker. If the funds receive final approval from the state’s commissioner of banks, the merger would be finalized at the funds’ shareholder meeting on March 19.
The DIF and CCB decided last year to join forces after exploring the possibility for several years. David Elliott, the DIF’s president and CEO, said the merger would increase efficiencies for about 90 member banks in the two funds.
The Massachusetts legislature established the two funds in 1932, and they began insuring deposits in 1934. The DIF insures small and mid-sized savings banks, while the CCB works with cooperative banks.
The funds insured the entire amount deposited in member banks through 1985. At the start of the savings and loan crisis, the two organizations became excess deposit insurers. Today, the FDIC insures the first $250,000 in a customer’s account and the DIF and CCB cover amounts above that threshold.
The statute establishing the two private entities did not include a merger provision, so the funds had to turn to the state legislature for approval. The House and Senate voted in favor of the bill, H.4176, on Feb. 6, and Baker signed it on Feb. 14.
Paperwork was then submitted to Commissioner of Banks Mary Gallagher for final approval, said Norman Seppala, the DIF’s executive vice president. He added that Gallagher has been invited to speak at the fund’s March 19 shareholder meeting.
The CCB also needed the majority of its member banks to approve the merger. Seppala said the CCB reached that threshold today.
After 26 years leading the DIF, Elliott plans to retire when the merger is complete. Andrew Calamare, the CCB president and CEO and a former commissioner of banks, will become head of the combined organization.
“Andy is the perfect person to run this,” Elliott said.
The CCB has already left its Boston office and moved into the DIF’s Woburn space. Elliott expects other staff members to retire soon, reducing the total staff and generating cost efficiencies. The 21 members of the funds’ boards of directors will combine into a new board. As terms expire, members will not be replaced, reducing the cost of directors’ fees. The board will eventually have 12 members.
“It took a long time to get to where we are but it’s a good move and will yield many benefits,” Elliott said.
