After fighting to recover from a troubled loan portfolio and regulatory reprimand, Stoneham Savings Bank has found a merger partner in the $2.8 billion Salem Five Cents Savings Bank.
The mutual banks will operate as affiliated banks under holding company Salem Five Bancorp, and together they’ll have almost 30 locations and $3.1 billion in assets. Stoneham will keep all its locations and employees, according to a statement, including CEO Don Fournier.
The $366.8 million Stoneham Savings will operate independently over the next three years, before its back-office operations are combined with the larger bank’s, Salem Five CEO Joseph Gibbons told Banker & Tradesman, adding that the slow transition will help prevent layoffs. Salem Five’s last merger, with Heritage Co-Operative Bank in 2006, was handled similarly.
Stoneham Savings branches will be co-branded with the Salem Five name for five years, but afterward will become solely Salem Five locations.
“Stoneham has tremendous customer loyalty,” Gibbons said. “We want to fully leverage all the goodwill that they’ve built up over the years.”
In an April 25 article, Fournier told Banker & Tradesman that although the bank was aiming to stay independent, a merger was still a definite possibility. Fournier took over leadership of Stoneham Savings in late 2010, after the ouster of previous CEO Richard Donovan.
Earlier that year, Stoneham was hit with a regulatory reprimand from the FDIC and Division of Banks because of serious losses on its real estate lending portfolio. The bank’s assets have shrunk from $408.6 million in the second quarter 2010, to the current level of $366.8 million, according to the latest data from the FDIC. It also managed to shrink its delinquent loans during that time – in 2010, 6.78 percent of its loans were “noncurrent,” compared to 2.73 percent by the end of the second quarter of this year. In April, Stoneham Savings sold its Belmont branch to Arlington-based Leader Bank.
Stoneham Savings’ existing branch network is the appeal for Salem Five, said Kenneth Ehrlich, partner with Boston-based law firm Nutter McClennen & Fish. Stoneham’s six branches dot Middlesex County, with Salem Five’s locations clustered mostly toward the east.
Salem must have liked what it saw in the Stoneham franchise, balance sheet troubles notwithstanding.
“The positives must outweigh the negatives, or they wouldn’t be doing it,” Ehrlich said.
Executives at Stoneham Savings contacted by Banker & Tradesman declined comment.
