Banks reorganize to be competitive`

By Jim Kinney

05/13/2008- The Republican

EASTHAMPTON - Easthampton Savings Bank and Greenfield Co-operative Bank are both reorganizing and setting up holding companies in a bid to be more competitive.

The banks are independent and happen to be completing the move at the same time.

Both banks are bound by charters from their founding, which limit their business activities. By setting up holding companies, the banks will have an easier time raising capital and an easier time with future mergers or acquisitions of other banks.

"I think that the competition in the financial services business is increasing dramatically," said William S. Hogan Jr., president and CEO of Easthampton Savings Bank. "The pressure on community banks continues to grow. The pace of change continues to grow."

Easthampton Savings and Greenfield Co-operative are at the tail end of a trend, Hogan said. Florence Savings Bank and others have already made the switch to a mutual bank holding company.

He said there is competition from local, national and international banks in the area, as well as Internet banks. The banking industry is also under pressure from the mortgage crisis and the weakened economy, he said.

Greenfield Co-operative Bank President Michael E. Tucker said it is a struggle for small banks to keep up with expenses, such as employee health insurance.

"This is to keep us competitive, really," Tucker said. "It gives us some of these powers that the stock banks have without having to go to stock."

The holding companies can borrow money and raise capital for their banks, Tucker said. The holding company could also make it easier to buy another bank without having to merge all the operations, Hogan said.

"You could put banks together through the mutual holding company and allow them to operate under the same name as they have today," Hogan said.

Both Hogan and Tucker said their banks aren't working on mergers or acquisitions.

"Things are going well now," Tucker said, "but we don't want to be in a position down the road where an opportunity comes up and the bank can't take advantage of that opportunity."

Greenfield Co-operative is mailing out letters to its depositors who will be asked to approve the shift to Greenfield Bancorp LLC at its June 17 annual meeting. The change could be made in October.

In Easthampton, Hogan said he expects to have ESB Bancorp in place by July.

Hogan said his bank hasn't publicized the move because customers won't notice it. "Same branches, same people, same name," he said.

Founded in 1869, Easthampton Savings Bank has $763 million in assets and eight offices, in Easthampton; Southampton; one on Locust Street and one on King Street in Northampton; Hadley; South Hadley; Belchertown; and Westfield. It plans to open an Agawam branch in 2009.

Greenfield Co-operative is 104 years old and has offices in Greenfield, Northfield and Sunderland. It has $240 million in assets.

Business writer Jim Kinney can be contacted at jkinney@repub.com