Unlike commercial banks, mutual banks are community banks with no stockholders or direct ownership. They are co-ops, owned by the depositors themselves. 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 that number is dwindling.
In 1980, nearly 75% of all U.S. thrifts were mutuals. Deregulation changed all that in the 1980s and scores of mutual banks converted to stock ownership. By the time we wrote about Merrimac Savings Bank, Mass.’s acquisition in 2015 (JRN 32:25), there were 414 mutual banks left, including Merrimac SB. Four years later, we are down to just 329; and only 15½% hail from Mass.
So last week when we read in the American Banker that another Bay State Bank was planning to convert, we decided to investigate.
5-Star Needham Bank, Needham, MA (a suburb of Boston), was chartered in 1892 and prides itself on its commitment to community. With over $2 billion in assets, it is larger than most mutual banks. As such, it will be in a unique position to pull other mutual banks under its wing once it converts to a mutual holding company form of ownership.
It looks as though Needham Bank is interested in buying other community banks too, though. It won’t be the first. Mutuals are doing whatever it takes to provide their customers the services they need and desire. The most complete metamorphosis to date has to be that of HarborOne Bank, MA.
- 1917: Brockton Credit Union was chartered in Brockton, MA.
- 2004: Name changed to HarborOne Credit Union as it spread its reach.
- 2013: Became HarborOne Bank, a Cooperative Bank (a mutual bank).
- 2016: Conversion to a 2-tier holding company structure: a Bank H.C. + a Mutual H.C. (MHC). The MHC is majority the shareholder of the former mutual bank so the mutuality stays intact.
- 2018: Acquired Coastway Bancorp and Coastway Community Bank, RI.
- 2019: Announced it will eliminate the MHC altogether leaving just HarborOne Bancorp, Inc. as the sole parent.
That is one way to go, but it is not the norm. The mutuals of the future will likely be fewer in number but more robust. Since 2015, Massachusetts has lost 11 other mutual banks. Four converted to MHC ownership (right), while seven others have merged (below).
Notes: 1 HarborOne (see page 1); 2 In 2017, Spencer SB became a Member of the Federal Reserve and concurrently changed its name to Cornerstone Bank.3 Pilgrim Bank assumed Abington Bank’s name and headquarter location in conjunction with its acquisition.