Watertown Savings Bank's deal to buy a smaller competitor in its upstate New York hometown would be the first acquisition in its 114-year-history.
It would also be one of the rare cases of a mutual thrift buying a stock-owned commercial bank.
The $303 million-asset Watertown said it would pay about $18.6 million in cash for Northern New York Bancorp Inc., the parent of the $98 million-asset Redwood Bank.
Bradley T. Clark, Watertown's president and chief executive, said that despite the difference in ownership type, the two companies have much in common.
"We're very similar banks," Mr. Clark said Wednesday, the day after the deal was announced.
Buying Redwood, which has $88 million of deposits, would give Watertown Savings the top market share in Jefferson County, with 28.8% of the county's $1.1 billion of deposits, according to data from the Federal Deposit Insurance Corp.
Both companies have all their branches in the county, six for Watertown Savings and four for Redwood, Mr. Clark said. Two branches are expected to be consolidated.
Two of Redwood's branches are in communities along the St. Lawrence River where loans tend to be larger than in other parts of the county because of higher property values, Mr. Clark said.
Those communities are already thick with competitors, including large companies like HSBC USA and KeyCorp, so Watertown Savings would not expand there without acquiring, Mr. Clark said.
"We wouldn't otherwise go there, only because there are too many banks there now," he said. "To add another [branch] doesn't make near as much sense as to acquire Redwood."
The acquisition also would give Watertown Savings access to the municipal deposit business. As a state-chartered mutual bank, it cannot take those deposits, under state law. Mr. Clark said the 94-year-old Redwood would be merged into Watertown Savings and take its name.
But his company intends to retain Redwood's state commercial bank charter and convert it to a special-purpose subsidiary, solely to hold deposits from government entities and school districts, Mr. Clark said. "That's a very attractive part of this whole deal."
Robert J. Sharlow, the president and CEO of both Northern and Redwood, would join Watertown Savings' board of trustees, as would one other Northern director.
Mr. Clark said Watertown Savings is not planning any other big moves, such as a stock offering. "We're committed to mutuality," he said.
Nor is it likely to announce another acquisition anytime soon, he said.
"This whole deal will be what we make of it, and that's going to be our focus for the next few years," he said.
Watertown Savings would pay $86.38 a share for Northern, a 64.5% premium over its Sept. 4 closing price. The thinly traded pink-sheet stock shot up 61.9% Wednesday, to $85.
The deal is expected to close next quarter or in the first quarter.
