Many routines were disrupted the last couple of years (to say the least). But as we begin to pull our lives back to some semblance of normal, it is a little surprising to see that some things (seemingly) never skipped a beat.
On Friday the 13th of May, two mutual banks filed paperwork to convert to stock ownership. They were: 5-Star Everett Co-Operative Bank, MA and 5-Star Van Wert Federal Savings Bank, OH. It turns out that the pace of mutual-to-stock conversions wasn’t much hindered during the pandemic. Three others already converted early this year and more than a dozen converted in each 2020 and 2021.
These conversions, and their accompanying Initial Public Offerings (IPOs) don’t get the same attention they once did. In fact, they often slip under the radar completely, at least to the general public. That seems especially true in the COVID era. It may surprise you to learn that at least 45 such conversions were either announced and/or completed in the past four years (see page 7).
All 45 banks listed on page 7 have submitted applications to either convert the mutual bank to a stock form of ownership or to create a mutual bank holding company that offers stock and also owns the bank.
Unlike commercial banks, mutual banks are community banks with no stockholders or direct ownership. They are co-ops, owned by the depositors themselves (with no dividends or voting rights). Originally created to promote savings and home-ownership, the first mutual was established in Boston in 1816. Historically, Massachusetts has been home to the majority of mutual banks, but the numbers are dwindling.
In 1980, nearly 75% of all U.S. thrifts were mutuals. Deregulation changed all that as scores of mutual banks converted to stock ownership each year. By the end of the first quarter 2022, there were down to just 283 mutual “banks”.
Not all converted, some were lost to mergers or acquisitions. Many opted to merge with other mutual banks while others sought to set up mutual holding company structures. Either way, it was an effort to preserve their mutual identities.
Readers who have been with us for a while may recall Merrimac Savings Bank. In (JRN 32:25) we wrote:
“Merrimac SB will be another in a long line of mutual banks unable to keep up with the pressures of small interest margins and regulatory burdens that have piled up since the 2008 crisis.
The $73 million asset ***½ Merrimac SB announced it will be acquired by *****North Shore Bank, a Co-op Bank out of Peabody, Mass. Granted, if it had to find an acquirer, it found a good partner. Established in 1888, North Shore, like Merrimac has a long history in Essex County, and a commitment to mutuality.”
While 5–Star North Shore Bank, a Co-Operative Bank, Peabody, MA was originally chartered as a mutual thrift. The company reorganized in 1998 by way of a mutual holding company conversion. As a result, North Shore Bank is now a stock co-operative bank, and a wholly-owned subsidiary of North Shore Bancorp, a mutual holding company.
Most of the banks listed on page 7 elected this route, others chose to go to stock-banks. But in most cases, the proceeds of the stock sales go back to the bank, not to shareholders. That’s why we put “bank” in quotes (toward the end of page 1). The number of mutual banks is in fact dwindling, but the number of mutual holding companies is growing.
What they do with those proceeds is really what separates the mutuals from other banks. True to their roots, most mutuals commit volumes of money and hours into local non-profits, volunteer activities, and scholarships. In fact, just glancing at North Shore Bank’s extensive list of local efforts lets you know they are there to help every citizen in their community—from the smallest infant to the elderly, no matter the gender or race.
North Shore Bank offers financial education for first time home buyers and job seekers. They support Habitat for Humanity and Citizens for Adequate Housing, sponsor food pantries, economic development and local libraries. North Shore Bank assists in school supply drives and lending to veterans.
North Shore Bank even donated $1,250 toward the renovation of the Newton, NH Police Department Headquarters. Then they threw in a new flag for good measure. You might ask, “what don’t they do?”