As large regional and national banks threaten to edge ever closer into their territory, two local banks in Fairfield County have joined forces to keep community banking alive in the path of competing giants.

Charles P. Bassos, president of Fairfield County Savings Bank, and Gary C. Smith, president of Ridgefield Bank announced last week that the boards of directors of at both institutions have agreed to a merger. Going forward, each bank will operate under its own name and continue to serve its existing markets. Bassos said, “This merger makes good business sense because these are both strong banks and there is little market overlap.”

Fairfield County Savings Bank is a mutual bank that has $370 million in assets and operates seven offices in the towns of Darien, Rowayton, Norwalk and Fairfield. Ridgefield Bank is also a mutual bank, with $620 million in assets and six offices in the towns of Ridgefield, Redding, Wilton and Norwalk. The combined bank will remain mutual, have a combined $1 billion in assets and almost $100 million in capital. It will become one of the largest banks headquartered in Connecticut.

Bassos explained that the Fairfield County Savings had been outlining a strategic plan to determine, among other things, how best to deal with increased competition from banking heavyweights in the area. Although the bank was in good health, posting two record years in a row, it was clear that maintaining such a high level of performance might become difficult to maintain in the increasingly competitive climate.

A failed acquisition a year ago led the bank towards the idea of merger.

“We could’ve competed for some period of time, but with Webster Bank planning a 25-branch expansion into the county, Commerce [Bancorp] coming up from New Jersey and Fleet Bank becoming more user-friendly, we thought it was about time we started bulking up,” said Bassos.

Bank officials started looking for a compatible bank with which to arrange a mutual-to-mutual merger. After exhausting several of the obvious candidates, Bassos decided to approach Ridgefield, having been friends with its president, Gary Smith, for a long time.

“We’d known each other for a long time and we’ve always respected each other,” said Bassos of Smith. “So I made the call.”

One of the initial ideas of the merger was that Bassos would be subordinate to Smith, who would remain CEO at Ridgefield in the mutual merger.

“To my mind, what stops mutual to mutual mergers from happening more often is that neither is willing to take the subordinate position. Someone has to be willing to do that,” said Bassos.

Once Smith agreed to the idea it was relatively easy to convince the banks’ respective boards of directors. “It was easy to convince them of the business efficacy of the deal because it just makes so much sense. We’re set to become the sixth-largest bank headquartered in Connecticut.”

The two banks are located in the heart of Fairfield County, and have contiguous coverage with little overlap.

Ridgefield Bank was established in 1871 and Fairfield County Savings Bank was established in 1874. Both banks have served their towns for more 100 years and have grown into full-service community banks.

Paul S. McNamara, chairman of Ridgefield Bank, will continue as chairman of the merged banks. He stated, “This merger will benefit the customers of both banks and the towns that they serve. Customers and businesses will benefit from the expansion of services offered and the ability of the banks to make larger loans in all markets. Mr. McNamara noted that participation in the community is a hallmark of each bank and that the combined charitable donations budget of the two banks will provide over $750,000 per year in donations to the communities served by our banks.”

Bassos will continue as president of Fairfield County Savings Bank, and be vice chairman of the merged bank. He said, “This is a win for the banks, win for the customers, win for the communities that are served, and a win for the employees of both banks. All employees will retain their jobs in this merger and that they will have greater opportunities for advancement going forward in a larger organization.”

Smith will continue as president of Ridgefield Bank. He agreed with McNamara and Bassos regarding the positive nature of the agreement. Furthermore, he said, “since each bank will continue to operate under its own name and identity, customers will see no disruption in this merger. We intend to blend our systems together seamlessly and to continue providing the highest level of service possible to our clients.”

‘Financial Steroids’

The proposed merger is subject to the approval of the Connecticut Department of Banking, the primary regulator of both banks, and the Federal Deposit Insurance Corp., which insures their deposits. Approval will take approximately four months according to Smith.

“I think it’s not only a viable strategy to keep community banking afloat in Fairfield County, but one that can be enhanced considerably,” said Bassos.

The move is being seen as a positive one for the region and the institutions involved by many industry watchers. In Fairfield County’s already crowded marketplace, the merger of the two mutual banks is being hailed as a sound strategy to maintain their current position in the marketplace.

“In the designated towns where they have branch office facilities and the particular niche markets in which they specialize, I think the combination is logical and well conceived, and it will improve their competitive viability,” said John Carusone, president of the Bank Analysis Center in Hartford. “That is not to say that it assures their competitive standing but it certainly improves their ability to maintain and enhance their position.”

Carusone noted that Fairfield County is arguably one of the most attractive banking markets in the country.

“Every banker and their dog covets an opportunity to penetrate that market and I think the combination of these two institutions represents an opportunity to sort of provide some financial steroids so that they can compete with large in-state and out-of -state players,” he said.

Several significant banks have set their sights on the county, which already has its share of local and regional stock. Webster Bank has committed a $50 million capital expenditure toward its 25-branch expansion from its base in Waterbury into Fairfield County. Commerce Bank has recently filed plans to enter from its headquarters in New Jersey. Charter Financial, a bank based in Cleveland, Ohio, is starting to penetrate surrounding areas with some spillover into the county.

“Manhattan-based institutions are already there in force, and it’s getting crowded,” said Carusone. “But these two institutions are symbiotic by way of both having a mutual charter, both having the same type of culture. The CEOs know each other, and they’re located in adjacent communities. I think there is a lot of merit to this.”