Whitman-based Mutual Bank is planning to merge with Brockton-based Security Federal Savings Bank in the fall.
Two mutual banks based on Boston’s South Shore are planning a merger to make themselves a more competitive player on the tough and crowded Massachusetts banking scene.
Pending approval from the Office of Thrift Supervision, Whitman-based Mutual Bank and Brockton-based Security Federal Savings Bank will officially join forces next fall. The two banks announced their plan on July 21.
Industry experts have been predicting increased consolidation in the industry and the leaders of the two federally chartered banks recognize that they are part of the trend.
“I wouldn’t be at all surprised to see smaller mutuals like us begin to merge,” said Bill Morse, president and chief executive officer of Security Federal.
Morse said most chief executive officers of small banks talk to other bank CEOs at some point to explore the chances of a merger.
Mutual Bank and Security Federal began their talks in April and quickly saw the benefit of combining their resources and becoming one institution, said Morse.
“The more we talked, the more we saw the advantages,” he said. “I think the strengths of each of our staffs will be even stronger once combined. You have to be a certain size to be able to compete. I think it will give us much more leverage in the local market.”
Kevin Handly, director and shareholder at the law firm of Gallagher Callahan & Gartrell in Boston, said since mutual banks cannot be bought or sold, this kind of merger is really a joining of two banks.
Handly said the combined bank will still be small, but it will have more resources and be able to share things such as the growing cost of regulatory compliance. He added such a merger can be tricky when a company actually comes together and has to decide which name to use and who takes over certain roles at the newly formed single institution – for example, who will serve as president.
Glen White, president and chief executive officer of Mutual Bank, will become chairman and chief executive officer. Morse will be president and chief operating officer once the merger is complete. Both of the bank leaders said they are pleased with the agreement. They also agree that Mutual Bank is the better name since it seems to be easier for customers to recognize and carries the message of mutuality.
White said he and Morse have known each other for years and get along well. He also said that everything about the merger just seemed to fit perfectly.
Although the banks have branches in towns that are in close proximity to each other, there wasn’t really an overlap. White said the two banks have not been direct competitors and that the merger really expands their footprint for business.
“I think the good thing is the synergy between the two banks,” he said.
Not only will the branch locations for each of the banks come together nicely, but also the strengths of each of the banks will be filling a void for the other, according to White.
White admitted that Mutual Bank has been weak in the field of lending. However, that is a strong area for Security Federal. At the same time, Security Federal has never introduced Internet banking to its customers, something Mutual Bank already has up and running.
‘Being Pinched’
Neither bank has been through a merger before, with both standing on their own for more than 100 years. However, times are changing in the banking industry.
“It’s getting more difficult. The smaller you are, it seems, the more you are being pinched,” said White.
The newly formed bank will have seven branches, but talks of opening a few more are already under way. White said he and Morse are eyeing a Middleborough location and maybe a few others.
Morse said his customer base seems to be viewing the merger as a positive step for the bank. All of the staff will remain with the bank and all of the branches except for the main branch, which was going to be closed anyway, will remain open.
Daniel J. Forte, president of the Massachusetts Bankers Association, said the merger fits into the trend of consolidation, but the branch-expansion plan also fits into another trend in the state. In 1985, there were 390 banks in the state. Today there are 209, said Forte, adding that there has been a 20 percent drop in banks.
However, branch expansion plans by the remaining banks account for an 8 percent increase over the last decade in the number of bank branches. In 1994, there were 1,984 branches in the state. Today that number has risen to 2,131, said Forte. He added that the number of bank employees also has risen in that time from 56,000 to 70,000.
According to Forte, 70 percent of banks in Massachusetts are mutual banks, which means they can’t just be bought or sold when the industry goes through changes. Forte said not only is banking getting tougher, but competition with other financial service operations also has entered the mix. He said the increased competition has made it harder for many banks to compete, which is why the industry is seeing an increase in mergers and consolidations.
“Mergers have to be part of a strategic plan. It has to make business sense as they move forward,” said Forte.
