BankFive of Fall River and Luzo Community Bank of New Bedford are similar in a few crucial ways. Both are community banks. And both have a long history, more than 80 years each, of serving a loyal Portuguese client base.
The crucial difference is that BankFive is 10 times larger than Luzo Bank, which is one reason the small community bank agreed to be purchased by BankFive last month.
Jose Gouveia, CEO and chairman of Luzo Bank, said he started seeking a partner about two years ago after noticing the bank’s lack of resources was hampering its ability to serve customers, especially those in the fishing industry of New Bedford.
As of Dec. 31, the Luzo Bank had a reported $65.99 million in total assets, $58.46 million in deposits and $42.41 million in net loans and leases. BankFive had $607.21 million in total assets, $445.67 million in deposits and $453.28 million in net loans and leases.
“It’s just harder and harder for very small banks to accumulate the critical mass needed to get through the regulatory burden that’s on banks now,” said Thomas Lyons, president and CEO of BankFive.
The lack of critical mass also makes it more difficult for small banks to invest in upgrades such as ATMs and online banking, neither of which was offered by Luzo.
In addition to increasing convenience, Gouveia said, the merger will bring Luzo’s customers a much-needed increase in available loan funds.
BankFive started commercial lending about six years ago.
“We have lenders with a lot of experience in the fishing industry,” Lyons said, “meaning we would be able to expand services in lending to [Luzo’s customers in] the fishing industry.”
He added: “I think we’ll be able to gather more customers.”
The acquisition did not surprise Frank Sousa, director of the Center for Portuguese Studies and Culture at the University of Massachusetts–Dartmouth.
Sousa said the Portuguese community has changed significantly during the past 25 years. Like most immigrant groups before them, they have moved to the suburbs, learned English and assimilated.
“In light of these kinds of developments, ethnic banks including [Luzo Bank] – the one historical Portuguese-American bank in the region – tend to disappear,” he said. “If many of the Portuguese customers did persist in banking at Luzo Bank for so long, it has in part to do with language, tradition and loyalty.”
Lyons said BankFive plans to keep all 29 of Luzo Bank’s employees because it wants to continue to serve existing customers and the Portuguese community. Many of Luzo’s employees speak Portuguese and have longstanding relationships with the customers.
BankFive has 200 full-time and part-time employees, he said. About 60 percent to 70 percent of them are Portuguese or of Portuguese descent.
Sousa said he believes the opening of a new, full-service Millennium BCP Bank in New Bedford might have attracted some customers away from Luzo, thus contributing to its desire to merge with a larger partner.
In addition, Gouveia said, “at 75, I’m ready to take a little bit of a back seat.” He will remain an adviser for BankFive, but asked not to be given a formal title.
Luzo is BankFive’s first acquisition in more than 100 years of operation, Lyons said. It is part of an expansion strategy the bank has been implementing since 2005, when it changed its name from Fall River Five Cents Savings Bank to BankFive as a way of becoming more generic so that it could move into new markets.
In addition, BankFive set up a mutual holding company a year ago so that it could purchase a bank such as Luzo, which is a closely held stock bank.
By April, BankFive will have opened three new branches within a one-year period, Lyons said. It opened its first branch in New Bedford last April, which points to another benefit from acquiring Luzo Bank.
“This will give us a total of three branches there,” Lyons said. “It would provide good coverage of the area.”
BankFive opened a new branch in Fall River this month and will open a new branch in Fairhaven in April.
Asked if he foresees any more mergers this year, Lyons said “we’ll keep our eyes open for opportunities, but right now we have a lot to digest.”
Lyons expects BankFive will convert the Luzo branches at 160 County St. and 1724 Acushnet Ave. in New Bedford by September, assuming the acquisition is approved by the Federal Deposit Insurance Corporation and state regulators.
With reports by PBN Web Editor Susan A. Baird.
