N.H. Merger Continues to Pare the Ranks of Mutuals

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The ranks of mutual thrifts continue to shrink as a pair of New Hampshire institutions plan to merge by early next year.

Merrimack County Savings Bank and Meredith Village Savings Bank expect to become one institution by January, marking the first merger of its kind in New Hampshire, says Sam Laverack, the president and chief executive of Meredith Village.

The merger, which does not involve a monetary exchange, will also create the state's biggest mutual thrift, with about $1.3 billion of assets. The mutuals will continue to operate under their respective names after completing the combination.

Reducing costs is the primary reason for such mergers, says Ted Kovaleff, an analyst at Horwitz & Associates. "You only need one back office, even if you've got two different names," he says.

Mutual mergers can help a smaller thrift — in this instance Merrimack County — survive with its identity intact, says Stanley Ragalevsky, a lawyer at K&L Gates in Boston who has advised other mutual thrifts on potential mergers.

"The smaller bank knows they need to form an alliance with someone, but they don't want to go through a merger where the identity of their institution disappears totally," he says.

Meredith Village, based in Meredith, N.H., has $690 million in assets and 13 branches in the central part of the state. Merrimack County, which is based in Concord, N.H., has $657 million in assets and seven branches in the southern part of the state.

None of the branches share a particular market, and the combined thrift has no plans to close any locations because of the merger, Laverack says.

Like many thrifts, the New Hampshire mutuals focus on residential mortgages. At Merrimack County, such loans made up about 43% of its $424 million loan book at June 30. For Meredith Village, 53% of its loans were residential mortgages.

Paul Rizzi, Merrimack County's president and chief executive, could not be reached for comment.

The number of thrifts is likely to keep dwindling because of consolidation and conversions to commercial bank charters, says Frank Schiraldi, an analyst at Sandler O'Neill & Partners. The trends "will continue to thin the ranks of thrift institutions," Schiraldi says.

"It's just a sign of the times, and we're the first ones in New Hampshire to do it," Laverack says. "But I think you will see more."

In the case of Meredith Village, the thrift "has never had the conversation about converting to a stock-owned institution," Laverack says. "We have every intention of remaining a mutual well into the future."

By sticking to its roots as a mutual thrift, Meredith Village should be able to fend off potential attacks by dissident investor groups that would otherwise try and force the thrift to undergo a stock conversion, Laverack says.

"We get calls asking if we're going to convert and the answer is no," Laverack says. "We are here to support our communities, customers and employees. We feel we can do that better under the mutual format and without the pressures of outside stockholders."

The thrifts are operating under a joint holding company, New Hampshire Mutual Bancorp, until they complete the merger, which requires regulatory approval.

Ronald Wilbur, New Hampshire banking commissioner, has recused himself from the application's review because he is a former chairman of Merrimack County Savings Bank. Glenn Perlow, the state's deputy bank commissioner, declined to comment on the pending application. A copy of the thrifts' application was not immediately available from the department.

Merrimack County is majority-owned by a mutual holding company, Merrimack Bancorp. Merrimack County is not publicly traded, so the thrift does not have to obtain approval from the Federal Reserve Board to waive its dividend.

A number of publicly traded thrift companies have faced issues with dividend waivers in the past year because the Fed has given mixed messages on whether it will require thrifts to obtain members' approval before waiving the payout.

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