Charles River Converting To Mutual Holding Company
Charles River Bank in Medway, which this year changed its name from Medway Co-operative Bank, is seeking approval from the Massachusetts Division of Banks to reorganize from a mutual co-operative bank to a mutual holding company.
Such a move can be the first step in raising additional capital, or a bank merger, but neither is definitely in the bank's future, according to its president and CEO Jack Hamilton.
"We have no plans for use of the new corporate structure, we're just creating it so the options are there," Hamilton said.
Options Open
Under the new organization, the bank would also be able apply for federal Capital Purchase Program funding from the U.S. Department of Treasury, or sell up to 49 percent of the stock of its new holding company, thereby increasing its access to capital.
The legal process of the reorganization will create a subsidiary stock bank that will be wholly owned by the new chartered mutual holding company.
The move will be virtually unnoticeable for customers as the bank's name, location, deposit accounts and borrowing will all remain the same.
Hamilton said he expects the approval process to be officially complete in the coming weeks.
The financial meltdown has been difficult for community banks, Hamilton said. The annual premiums Charles River Bank owes to the FDIC for insurance have risen from about $16,000 in 2006 to an expected $400,000 next year.
Hamilton is closely monitoring new regulations the federal government may impose on banks and said being a mutual holding company would allow the bank to raise capital or reduce expenses quickly, if necessary.
"It's better to have these tools available when you don't need them as opposed to rushing to create them when you do," he said.
Charles River Bank has about $185 million in assets, as of June 30, and had about $105 million in loans, almost all of which are residential. The bank's total deposits increased from about $110 million last year to almost $150 million this year, according to records from the FDIC.
After the name change this spring, the bank opened new branches in Bellingham and Mendon.
According the Massachusetts Division of Banks, more banks in the state are reorganizing into mutual holding companies. In 2004 and 2005 there were three banks that reorganized each of those years. In 2006, six banks reorganized and last year there were four. In 2009, there have already been five reorganizations.
Webster Five Cents Savings Bank in Webster reorganized into a mutual holding company in the first quarter of this year for many of the same reasons Hamilton said Charles River is pursuing the new status.
"Given the challenges of the banking industry and the general economy, it was our position that we needed to have all the resources and options available to us that a mutual company charter would provide," said Webster Five President Richard Leahy.
Leahy said since the reorganization the bank has not made any major changes, but he said the bank is also exploring opportunities.
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