Worcester Business Journal

34 2016 Economic Forecast www.wbjournal.com Worcester Business Journal B a n k i n g & F i n a n c e While the pressure to merge had been building for years, it appears that the flood- gates have finally broken and the mergers are beginning. Even solvent local banks are look- ing to mergers to ensure they can continue to serve the community while meeting regula- tory guidelines. Whether it is done through merging holding companies or the banks themselves, this is something sure to contin- ue into 2016. Mergers continue even as banks get more breathing room W hile banks have prepared for a potential federal interest rate hike for the first time in nearly 10 years, many are being forced to deal with continuing difficulty maintaining their independence. Still, there will be more room for banks to profit in 2016 and we expect the finance industry to get a leg up from the fed's first interest rate hike in years. Bank mergers will continue Company's margins will grow Online security will reach a new level The security of all kinds of online financial transactions continues to be a major concern for every segment of business. While banks are often the most well protected, they are pouring resources into maintaining that pro- tection. With new technology like the credit card chip and pin system making its way through the system, even small retailers are being made a part of cutting edge financial security steps. n Some of that pressure that has led to merg- ers will see some relief for banks, with the federal interest rate set to rise. This will give banks the wiggle room for more profits but could lead to a hunt for market share with some banks maintaining low rates to pull in new customers. While this might mean short- term gains, the long-term viability of this kind of play for market share is risky. C ommunity banks -- striving to compete against multi-billion conglomerates while maintain- ing their strong local ties -- are taking a creative approach to combine their power while retaining their identities. By merging holding companies as opposed to the banks, the organizations are able to retain their name and man- agement while getting much of the cost- savings and the size associated with a traditional merger. The technique moves much of the work that is done during a traditional merger to the hold- ing company level, where finances and oversight of the two holding companies come together, but community banks retain their same front-facing relation- ship to customers. Hometown Bank and Easthampton Savings Bank undertook a merger of their holding companies in September. The merger of ESB Bancorp Inc. with Hometown Community Bancorp will create a mutual holding company with more than $1.7 billion in assets, more than $180 million in equity capital, and a combined branch network of 23 offic- es in Central and Western Massachusetts and Northeast Connecticut. This will place the new holding company among the top 10 largest banks in Central Massachusetts when ranked by assets. Regardless of whether it is a straight merger or that of holding companies, continued mergers are on the agenda moving forward. "The whispers and the chatter in our industry seem to indicate a lot of talk among banks about mergers or mutual holding companies," said Matthew Sosik, Easthampton Savings Bank presi- dent and CEO. T he Federal Reserve will raise interest rates for the first time in 10 years by the end of 2015. Central Massachusetts bankers are bull- ish on only the opportunities that can come with higher rates as well as the strength of the local economy and its ability to absorb small rate increases. T O P BA N K I N G & F I N A N C E S T O R I ES O F 2 0 1 5 Banks combining power, keeping identities BY SAM BONACCI Worcester Business Journal Digital Editor Banks on interest rate rise: Bring it on! New banking partners Edward Manzi Jr., left, of Fidelity, and Guy Boyer of Barre Savings Bank say the two institutions they lead share key values. That facilitated a merger that is underway. P H O T O / M A T T V O L P I N I

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