As some of the region’s largest stock banks go through mergers this year, mutual banks could benefit from the disruption.
“[Mutual banks] represent stability with respect to their customer bases and their franchises,” said Arthur Loomis, president of Loomis & Co., a New York-based investment bank that works with banks in the Northeast on mergers and acquisitions. “That’s valuable to people when there’s a lot of turmoil, and a lot of mergers tend to create turmoil in the customer base.”
While the level of turmoil will likely vary with each of the five major mergers planned by banks based locally or with significant presence here, mutual bank leaders see opportunities to gain customers and skilled employees.
The merger of equals between Connecticut-based Webster Bank and New York-based Sterling National Bank with likely have the least effect on the Massachusetts market, with the Webster name surviving and a branch consolidation already underway before the merger was announced.
The largest Connecticut-based stock bank, People’s United Bank, could cause the most disruption, as its acquisition by M&T Bank brings a new name to the Massachusetts market and leadership based in Buffalo, New York.
People’s United Could Lose Out
When that acquisition is complete, Loomis expects 5 to 10 percent of People’s United’s customers will leave M&T in the next year or two, preferring a local bank and its known management. The run-off might be even greater in markets where People’s United has completed acquisitions over the years, he said, including in Western Massachusetts, the Hartford area and New Hampshire.
With People’s United Bank’s most recent acquisitions of Hartford-based United Bank, Belmont Savings Bank and Connecticut’s Farmington Bank, some customers in Massachusetts will find themselves banking with their third different institution in less than three years.
Boston Private is also being acquired by an outside institution, California-based Silicon Valley Bank, though Boston Private’s CEO, Anthony DeChellis, will co-lead the bank after the deal is complete.
The deals involving four of Greater Boston’s other large stock banks – Eastern Bank acquiring Century Bank and Rockland Trust acquiring East Boston Savings Bank – will see control of the banks remaining local, though both mergers are expected to involve branch consolidations.
Rockland Trust could lose some of East Boston Savings Bank’s customers who shop for rates higher than what Rockland Trust offers on certificates of deposit, Loomis said. But he added that Rockland Trust’s wealth management division could also have opportunities to offer other products to this segment of customers.
Neither Rockland Trust’s CEO Christopher Oddleifson and Eastern Bank’s CEO Bob Rivers has publicly suggested they would do a better job running the banks they are taking over, a faux pas Loomis said he has seen upset both commercial clients and employees of other banks being acquired.
Suddenly very familiar with remote work protocols thanks to the pandemic, some banks say they could hire key staff from outside their market.
Some Customers Prefer Mutuals
Julieann Thurlow, president and CEO of Reading Cooperative Bank, said market upheaval brings opportunities for new customers, noting that some customers will not like the change.
“Change is opportunity,” Thurlow said. “Customers still have choice, and there’s still plenty of choice in Massachusetts.”
Reading Cooperative Bank’s periods of greatest growth have come after mergers of community banks, she said, including when the parent company of Danversbank went public before selling itself to People’s United Bank in 2011. Danversbank’s customers were of the size and type that Reading Cooperative Bank best serves, she said, and the bank took significant advantage of that disruption. Some of its customers also clearly understand the difference between cooperative and mutual banks and public companies, she said, and find the former more appealing.
Because mutual banks are not necessarily driven by quarterly performance, return on assets and returning value to shareholders, Loomis said, they have the ability to take a long view about how to grow during times of disruption. Those mutual banks with over $2 billion in assets have the scale and resources to benefit the most.
Tom Senecal, president and CEO of Holyoke-based PeoplesBank, said the Western Massachusetts and Connecticut markets have already seen customers looking to transition to new banks because of the disruption.
Less than two years ago, Western Massachusetts had PeoplesBank, People’s United Bank and United Bank. Senecal said he will not be disappointed to see an end to the confusion that generated. Rather than taking an aggressive approach to capitalize on the shifting landscape, Senecal said, PeoplesBank will instead emphasize its own identity in its marketing and aim for organic growth.
“Our marketing opportunities are just to explain who we are and what we are,” Senecal said. “We are not part of an organization that’s disappearing.”
While PeoplesBank doesn’t see loan opportunities on the scale of People’s United’s, Senecal said the bank recently hired five lenders focused on the commercial and industrial space.
Recruitment Opportunities Created
Disruption in the market provides opportunities to offer stability to employees whose skills a bank is looking to acquire, said Wayne Patenaude, president and CEO of Cambridge Savings Bank. Cambridge Savings Bank hired workers from banks involved in two mergers in recent years, he said, and also created a new asset-based lending team with former staff from Blue Hills Bank, which was acquired by Rockland Trust in 2019.
Diane McLaughlin
“It is very much an opportunity that exists more or less when there’s disruption in the market,” Patenaude said. “If there are talented employees out there that are looking for the stability that Cambridge Savings Bank can deliver – leverage their talents in a way that we like to do – we’ve proven to be a place for people to go to and extend their careers.”
Todd Tallman, CEO of Worcester-based Cornerstone Bank, which was created by the merger of two community banks about five years ago, said mutual banks still need size and scale to bring on and retain commercial customers and attract talented employees.
Commercial lending in particular can be a difficult area for finding staff, he said, and Cornerstone expects some employees of the banks involved in the acquisitions will be looking for new opportunities – not all of whom might be Worcester market residents thanks to the industry’s experience of remote and hybrid work models during the pandemic.
