South Shore Bank and Braintree Cooperative Bank announced earlier this month they will be merging.
WEYMOUTH — Community savings institutions on the South Shore are banking on better personal service and strong local ties as they merge operations in an effort to stay competitive with much larger national rivals.
Last week, South Shore Bank and Braintree Cooperative Bank became the latest such institutions to announce merger plans.
Paul Pecci, president and CEO of Braintree Cooperative Bank, said the merger is intended to help the banks survive in a market in which competition is increasing and technology is changing rapidly.
“It’s getting harder and harder for small banks to survive in this economy,” Pecci said. “Smaller banks have always had Bank of America right around the corner.”
The merger boom has reduced the number of smaller community banks.
Abington Bank and Holbrook Cooperative Bank, both century-old institutions, completed a merger last year. In May of this year, Abington Bank announced that it would merge with the smaller Avon Cooperative Bank.
In 2015, the merging of S-Bank and Scituate Federal Savings Bank created Coastal Heritage Bank. The banks’ chief executives termed it a “friendly merger” – one that would not lead to layoffs and branch closures.
In western Massachusetts, Chicopee Savings Bank and Westfield Bank merged last year.
A 2008 study in Economic Review found that most of the time, a small bank usually merges with another small bank rather than a large institution like Bank of America.
While the disappearance of small banks may concern some, mergers enable small banks to consolidate resources and quickly gain large numbers of customers. It can be a strategy for surviving in a tough economy.
A 2015 study by Harvard’s Kennedy School found that the number of community banks in the U.S. has dropped since the 2008 recession. Their share of assets declined 12 percent between 2010 and 2014.
While community institutions do compete with one another, they also can help each other, Pecci said.
“If somebody stumbles, there’s somebody there to pick you up,” he said.
South Shore Bank President and CEO James M. Dunphy said South Shore Bank has not been strong in Braintree. Not only will the merger give it access to Braintree Cooperative’s customers, it will lead to an increase in the size of the loans that can be approved, he said.
Dunphy said both banks had to make sure the merger was a strategic fit.
“Just growing for the sake of growing bigger doesn’t make sense. … You have to make sure the culture fits,” he said. “We’ll be taking practices from both sides as we go through.”
Pecci said another benefit is being able to pool technology resources.
“As a small bank, it’s very difficult to effectively develop new products and stay on top of all the chances changes in technology,” he said. “We are so excited because a lot of the things on our wish list, things that customers are looking for, South Shore Bank has already developed a lot of it.”
Technology, like mobile banking applications, allows small local banks to retain customers who move away from the area.
“We try very hard to develop different technology so we can maintain relationships at a distance,” Pecci said. “One of the things that was a problem for smaller banks was location. It limited how much interaction you could have with a customer. Now, technology allows us to follow a customer who may start in Weymouth or Hanover but end up somewhere else.”
Pecci and Dunphy said the merger will let the banks stay local, and they see that as the biggest plus because it is their main advantage against big banking institutions like Bank of America and Citi.
The two banks will merge operations under the South Shore Bank name. Braintree Cooperative Bank customers will have access to a bigger network of branch locations and ATMs, along with more products and services. South Shore Bank customers will have access to a new team of bankers.
Pecci will be president of the expanded company; Dunphy will be CEO. Members of both banks’ management teams will retain senior roles in the new entity.
“We have felt we cannot compete with them (the biggest banks) on a product level, but we can beat the pants off them with customer service, and we’ve always felt that way,” Pecci said.
Dunphy agreed, saying it’s important for the CEO of a community bank to stay in touch with the community.
“That was our job then, and it will continue to be our job. It’s about local people being able to make local decisions,” Dunphy said.
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