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Webster bank reborn; Five Cents Savings adopts a new form to meet the future.

Byline: Brian Lee

Webster Five Cents Savings Bank, a mutual savings bank, has reorganized into a three-tiered mutual holding company, providing a legal structure under which it can look at opportunities it couldn't before, said Richard T. Leahy, president and chief executive officer.

The reorganization doesn't change its internal operation, but positions the bank "to take advantage of potential expansion opportunities that may arise from time to time," Mr. Leahy said.

The new legal entities took effect Sunday. The reorganization was approved by the Board of Bank Incorporators, Massachusetts State Division of Banks, Federal Reserve, Federal Deposit Insurance Corp. and the Depositors Insurance Fund, bank officials said.

A mutual holding company is a structure set up to provide for multiple mutual banks under a holding company umbrella, said Mr. Leahy.

Mutual savings banks are community-based institutions that don't have shares to sell and are not traded like public companies, said Bruce E. Spitzer, a spokesman for the Massachusetts Bankers Association. About 70 percent of the state's 200 banks represented by the association are mutual institutions that have set up mutual holding companies, much more prevalent than other states, Mr. Spitzer said.

David Cotney of the Massachusetts Division of Banks said 14 bank holding companies created by mutual institutions were consummated from 2006 to 2008, not including Webster Five Cents Savings Bank, which was pending in 2008. There were seven in 2006, three in 2007 and four last year.

It was under the mutual holding company structure, Mr. Leahy noted, that Avidia Bank was created through a merger between Hudson Savings Bank and Westborough Bank. Avidia Bank opened in October 2007.

According to Mr. Spitzer, becoming a mutual holding company makes it easier for banks to combine with other mutuals and "eke out some cost efficiencies in doing that while still maintaining the mutual charter." But it is not a big trend, he said.

"I'd call it something akin to a business strategy we see occasionally, simply because we have so many mutuals," he said.

The mutual holding companies throughout the state are profitable, Mr. Spitzer said.

"They are realistically a legacy charter," he said. "Here it's been around for many years, decades. It works well here. Our banks are thriving in the communities that they serve. They are generally the quintessential community banks."

"Sometimes they can't raise capital as easily as a stock-traded institution who can just issue more stock," said Mr. Spitzer. "But because they are community-based, they generally have a good history of focusing on the communities that they serve and both taking deposits and lending out to those same members of the community."

Founded in 1868, Webster Five Cents Savings Bank had $544 million in assets at the end of 2008, 167 full- and part-time employees, and branches in Webster, Dudley, Oxford, Auburn, Worcester and Shrewsbury, Mr. Leahy said. The bank posted a net loss of $5.7 million last year, largely because of securities losses, compared with net income of $3.7 million in 2007. Net operating income for 2008 was $4.2 million, up from $3.5 million in 2007.

"When we look at our net operating profit prior to write-downs, we can see that we've improved over the prior year," said Mr. Leahy. "That's what you have to measure against, the core operating experience of a bank, and ours has improved."

In addition to acquiring banks, Mr. Leahy said, the mutual holding company could consider affiliating with, acquiring or operating a separate subsidiary - for example, an insurance agency, payroll services company or other financial services operation under the mutual holding company umbrella.

Under the umbrella, WebFive MHC, the holding company, owns 100 percent of the stock of WebFive Financial Services Inc. The bank corporators and trustees are responsible for controlling the new company and its new entities, which is the same control they had when it was just the one mutual bank, Mr. Leahy said.

Spencer Savings Bank established a mutual holding company in May 2007, said K. Michael Robbins, president and chief executive officer.

Southbridge Savings Bank was approved to reorganize into a mutual holding company in October. Philip Pettinelli, president and chief executive officer, said it took 13 months to set up.

Officials at the Webster, Spencer and Southbridge banks have yet to do anything with their mutual holding companies, which Mr. Robbins contends is actually the trend. Mr. Robbins said his bank would make a move only if it made sense.

"We always keep our eyes and ears open," he said, "but these opportunities don't present themselves all that often. Ninety-seven percent of the banks who have set them up have not used them."


CUTLINE: (1) Richard T. Leahy is president and chief executive officer of Webster Five Cents Savings bank, which recently became a mutual holding company. (2) Mr. Robbins (3) Mr. Pettinelli (CHART) Mutual holding companies formed in Massachusetts

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Title Annotation:MONEY
Publication:Telegram & Gazette (Worcester, MA)
Date:Mar 3, 2009
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