A growing number of mutual savings banks are considering mergers to ensure survival.

Roughly two-thirds of mutuals recently surveyed by the American Bankers Association said they had considered merger with another mutual. Forty percent gave it even odds that they would participate in a merger by 2019.

The costs of regulation, technology and health care, combined with soft loan demand and low interest rates, are forcing some to decide if they would benefit from being larger. Social issues often derail deals, though some mutuals are still deciding to merge.

Such issues weighed on Meredith Village Savings Bank and Merrimack County Savings Bank when they merged in 2013 to form New Hampshire Mutual Bancorp, Sam Laverack, the company's co-CEO, told attendees at a Monday panel hosted by the American Bankers Association.

"We felt we had strong institutions but ... we saw challenges that are beyond our careers," he said. "We had to set the baseline for the organization to continue forward."

Other bankers at the conference agreed that mutuals need to take a hard look at consolidation.

"Almost every banker has to think about it from time to time," Don Jennings, Don Jennings, CEO at Kentucky First Federal Bancorp (KFFB) in Frankfort, says. The $236 million-asset mutual roughly doubled in size last year when it bought CKF Bancorp.

Still, social issues threaten mergers, says Martin Connors Jr., president and CEO at Rollstone Bank & Trust in Fitchburg, Mass. The $598 million-asset mutual has considered acquisitions, and has even talked to other institutions about it. In the end, he says those banks "decided to stay the course."

Many mutuals in the Northeast are well capitalized and do not feel an urgency to sell, Connors says. "Usually the smaller bank doesn't want to seem like it caved in and sold" the community out, he adds.

The panel's members emphasized the importance of addressing social issues with advance communication and planning. Laverack says no one used the word merger when New Hampshire Mutual was formed, calling the combination an "alliance."

So far, New Hampshire Mutual has had a smooth transition because of the "homework we did prior to an agreement," Laverack says. It included bringing both boards together to craft a three-year strategic plan to integrate the institutions, says Paul Rizzi, the mutual's other CEO.

New Hampshire Mutual's customer facing components remain independent while the mutual gained efficiencies by integrating back offices.

Though gaining efficiencies is a key reason for mergers, it wasn't so overwhelming that executives were willing to fire people to cut costs. Panelists said it was important to make sure everyone had a job after a merger.

Such was the case when Northwest Community Bank and Litchfield Bancorp merged in 2001 to form Connecticut Mutual Holding and when the company bought Collinsville Savings Society in 2010. Each savings bank operates independently.

"We weren't trying to squeeze out profit," Thomas Villanova, Litchfield's president and CEO, says. "We are trying to position ourselves for efficiencies as we grow."

Increased size leads to lower regulatory expenses and technology costs, while allowing the new company to make bigger loans.

"If [a merger] is done with mindset that we can grow revenues and attract more deposits, then we are adding franchise value," says Tom Fraser, president and CEO of First Federal Savings and Loan in Lakewood, Ohio.

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