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 two announced today.
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, including CEO Don Fournier.
The $366.8 million Stoneham Savings will also operate under its current name for at least the next three years, the banks said in a statement. Notably, both banks operate insurance subsidiaries which will be merged after the transaction closes.
In an April 25 article, Fournier told Banker & Tradesman that although the bank was improving its balance sheet and prospects with an eye toward staying independent, a merger was still a definite possibility. Fournier had taken over leadership of Stoneham in late 2010, after the ouster of previous CEO Richard Donovan.
Earlier that year, Stoneham had been 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 improve profitability and shrink the amount of 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. About $18.9 million in loans were more than 90 days past due in 2010, compared to $6.3 million this year.
Fournier told Banker & Tradesman this spring that the institution had worked steadily to improve its balance sheet and had been seeking to raise capital by reducing expenses or selling assets. In April, the bank sold its Belmont branch to Arlington-based Leader Bank.
Stoneham Savings’ existing branch network is probably the appeal for Salem Five, said Kenneth Ehrlich, partner with Boston-based law firm Nutter McClennen & Fish. Stoneham’s six branches run up the northern half of Massachusetts, roughly along Interstate 93, with Salem Five’s locations clustered nearby, fanning mostly from the interstate eastward.
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.
Calls to Salem Five were not returned, and executives at Stoneham Savings contacted by Banker & Tradesman declined comment.
