The Dukes County Savings Bank and Martha's Vineyard Cooperative Bank, both respected institutions with long histories on the Island, have confirmed plans to merge and become a single community bank with total assets of $460 million.
The combined bank, still subject to approval by state and federal regulators, will be named the Martha's Vineyard Savings Bank and will continue to be mutually owned and locally based. The merger is expected to be completed by the end of the year. The merger plan was announced to staff of both institutions on Monday and first reported in the Gazette on Tuesday; a formal press release was issued the same day. It still requires approval from federal and state regulators as well as the Dukes County bank board of corporators and the cooperative bank depositors.
No staff cuts are planned, bank leaders said. Savings bank president and chief executive officer Chris Wells will become president of the merged bank, while cooperative bank president Richard Leonard will become the chief operating officer. In an interview with the Gazette on Wednesday both men described it as a strategic move aimed at protecting both local banks well into the future, and also said it would allow them to expand services and increase lending power.
They said the merger has been in the works for about a year, although the understanding that the two institutions were complementary had been around much longer. "One of our incorporators told us that his father, when he was a corporator, talked about these banks getting together, back in 1960," said Mr. Wells. "So bringing them together is something that has been on and off over the years."
But it took the personal relationship between the two men to turn years of talk into reality. Mr. Wells recalled when he arrived on the Island in November 2004 to begin work with Dukes, having previously worked in community banking on the Cape. "On my first day Richard called and said we should get together for lunch," he said.
As they got to know each other and each other's business better, two things became increasingly clear. On the institutional side, Mr. Wells said: "The synergies were so transparent it was like it was one bank." And on the personal side: "When Richard and I talked about this ... talking to Richard was like talking to me."
Throughout Wednesday's interview, the two men spoke and behaved a little like a merged entity themselves. They finished each other's sentences, amplified each other's sentiments, deferred to one another on facts and figures, completed anecdotes and enthused in concert about the future.
"For us, our focus collectively for both banks over the past couple of years has been more on the commercial side of things. Together I think we'll make better inroads . . ." Mr. Wells began. "Financing commercial real estate," Mr. Leonard continued. "[And} commercial and industrial loans," Mr. Wells concluded.
Mr. Leonard said: "And then there is the technological aspect." Mr. Wells continued: "Exactly. The investment in that technology for us to both to make simultaneously is foolish."
From structure to customer base, the two banks are remarkably similar. Both are mutual banks - which means there are no stockholders. Mr. Wells said Dukes County Savings Bank was one of the last three mutual chartered savings banks to be established in the country when it began in 1955. The cooperative bank was founded under the same mutual structure in 1908.
"The people who started those banks . . . wanted them to be independent, beholden to customers and depositors and to remain here," Mr. Wells said. "So we both have had the same values for a long time." The savings bank began with initial deposits of $400,000 and a gala opening party on April 22 1955 that was well covered in the Gazette, which among other things published the long list of savings banks from around the country that sent in their congratulations. The cooperative bank, founded nearly 100 years ago, made its first loan of $500 to a woman to buy a home.
Today the cooperative bank has assets of $160 million, 46 staff members and three Vineyard branches with headquarters in Vineyard Haven. The savings bank has assets of more than $300 million, 61 staff and seven branches with headquarters in Edgartown.
Together they will have about $335 million in loans, $335 in deposits, and $48 million in capital.
The savings bank portfolio currently includes $190 million in loans, about $136 million of which are residential and consumer. The cooperative bank has $145 million in loans, of which about $115 million is residential. Neither bank, they said, sells its mortgages.
Both men were keen to stress such differences between their operations and those of most banks.
"There's no financial gain for anybody at the [mutual] bank. The financial gain is for the community," Mr. Leonard said.
They said the merger was not driven by any immediate threat to either bank, but rather represents a strategic piece of long-range planning aimed at creating both strength and efficiencies.
A merger means one operating platform and one auditor, among other things.
"Every time we duplicate something, whether it's in product development or something, then there's less we're able to do overall," Mr. Wells said.
The merged bank aims to develop a wider range of services, they said. Customers want to be able to make transactions on line, by phone, and not necessarily simply from one account to another, but also to other financial entities, not just locally but nationally and internationally.
Mr. Wells revealed statistics that show Dukes County is what he called the most over-banked community in the commonwealth, with an average of 353 customers for every branch. The next closest is Nantucket with 1,000 customers per branch.
The Vineyard is home to four banks - in addition to the savings and cooperative bank there is the Edgartown National Bank and Sovereign Bank (formerly Compass and originally the Martha's Vineyard National Bank).
But Mr. Leonard said: "Competition is not necessarily just coming from the brick and mortar locations anymore. Anywhere that people can click becomes competition."
Said Mr. Wells: "To a lot of these nationwide banks, their back yard is the whole country and Martha's Vineyard is a destination point for the country, so when somebody comes to the Island with their mortgage commitment in hand, from Ohio or Seattle or Nebraska, we have to compete against that. "You have to make sure your bank is able to keep up just in scale."
But of course the real value of the local bank remains in its knowledge of and links to the community.
"The value we provide is that personal relationship," Mr. Leonard said.
When the merger is complete most of the changes will be invisible to customers. Philip J. Norton Jr., the current chairman of the cooperative bank board, will become chairman of the new board, while Frank Fenner, chairman of the savings bank, will become vice chairman.
The application to merge will be filed this month, triggering a three-month process with relevant regulators, the Massachusetts Division of Banks and the Federal Deposit Insurance Corporation.
"We've done our homework to get this far and we feel everything will go fine with the regulators," Mr. Wells said.
So what problems remain to be fixed?
Said Mr. Leonard: "The major hurdle now is who we're going to play at softball, because we've played each other over recent years."