From some of the largest state banks to some of the smaller ones, Massachusetts community banks maintained a steady pace of merger and acquisition activity in 2019, a pace expected to continue in 2020.  

This activity, like the banks themselves, will likely see impacts from the broader economy, including the low-interest rate environment. 

“While 3 to 5 percent of community banks are acquired annually, community bank merger activity is really a prisoner of the current macro environment,” said Arthur Loomis, president of Loomis & Co., a New York-based investment bank that works extensively with community banks in the Northeast on mergers and acquisitions. “They are inextricably linked.” 

Opportunities for Buyers and Sellers 

With low interest rates forecast for the next couple of years, the narrowing spread between what banks pay on deposits and earn on loans will play a role in the M&A market, leading both buyers and sellers to look for opportunities. 

“Because interest rates are going to stay low, that’s going to continue to put pressure on bank’s spreads and margins,” Loomis said. “That’s going to continue to dampen the ability for community banks to grow their earnings.” 

Loomis has seen prices soften with M&A transactions so far this year compared to 2018, and he expects that trend to continue. Still, low interest rates could drive buyers to place a premium on banks with a high level of non-interest-bearing deposits or non-interest income, Loomis said.  

Community banks looking to sell should consider more than the value on the date of the announcement or the closing, specifically evaluating the long-term return potential that a higher performing bank might offer, Loomis said. 

Community banks are sold, not bought, Loomis said, and because banks have longstanding ties within their communities, some directors often don’t want to sell. They fear the stigma, optics and effects within the community, potentially leading to inertia among potential sellers. 

Loomis expects Massachusetts to continue to see 3 to 5 percent of community banks acquired. He also said mutual banks will continue to combine. Banks with $300 million or less in total assets might seek to combine to improve technology and processes or receive support with compliance and regulatory exams. 

Even within the current environment, banks can still survive. 

“A smaller bank can survive and thrive, but they have to be a lot better about their business and their performance than they typically have been in the past,” Loomis said, referring generally to community banks. 

Bigger Banks on the Lookout 

Two of the largest state-chartered banks, Rockland Trust Company and Berkshire Bank, were both buyers in 2019.  

Rockland Trust completed its acquisition of Blue Hills Bank in the spring. During the third–quarter earnings call for Independent Bank Corp., the bank’s holding company, Rockland Trust CEO Chris Oddleifson said the bank expects to continue the bank’s trend of being involved with an acquisition every 1½ years for the past 15 years. 

“There will be opportunities, and with our currency, I expect to be at the table, and I would very much like to be there,” Oddleifson said. 

Berkshire Bank was also involved in a merger this year, acquiring Connecticut-based Savings Institute Bank. But when asked for his thoughts on merger activity going into 2020 during the company’s third quarter earnings call, Berkshire’s CEO Richard Marotta said, “I have absolutely no thoughts on it, just because it’s not on anybody’s radar or certainly not on my radar.” 

Diane McLauglin

Another bank active in Massachusetts M&A in 2019 was Connecticut-based People’s United Bank, completing acquisitions of Belmont Savings Bank and United Bank, which has branches in the central and western parts of the state.  

People’s United Bank Chairman and CEO Jack Barnes said during the bank’s third–quarter earnings call that mergers and acquisitions have given the bank opportunities to build deposits, gain market share and deepen relationships in the markets it serves. 

“We think that’s all been very valuable and will continue to pay dividends for us,” Barnes said. 

He was responding to a question about whether changing dynamics and market response would lead the bank to reconsider mergers and acquisitions as a tool for creating shareholder value. Declining interest rates will be a factor when considering future merger activity, Barnes said. 

“The thoughtful M&A we’re doing is a long-term perspective about gaining market share and getting and growing new customer bases,” CFO David Rosato added. 

Some smaller banks were also involved in M&A. North Shore Bank completed its acquisition of Beverly Bank in October; Equitable Bank merged into Coastal Heritage Bank; and North Easton Savings Bank acquired Mutual Bank. 

The holding company Hometown Financial Group saw Pilgrim Bank merge into Abington Bank and Millbury Savings Bank into bankHometown. 

Cross-state activity occurred, too, with Cambridge Trust acquiring Optima Bank in New Hampshire.