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Merrimac bank will soon merge with larger rival

Economy Co-operative’s lone branch will soon be taken over, putting an end to another small bank

As CEO of Economy Co-operative, one of a dwindling number of small banks, Gary Gozycki answers his phone and handles loans. As CEO of Economy Co-operative, one of a dwindling number of small banks, Gary Gozycki answers his phone and handles loans. (Cheryl Senter for The Boston Globe)
By Todd Wallack
Globe Staff / October 2, 2011

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MERRIMAC - Economy Co-operative Bank has seven employees and one location. There are no commercial loans, no telephone banking, and no automatic teller machines.

Still, Economy offers one feature few other banks can match: Customers can walk into the chief executive’s office and try to negotiate higher rates on their certificates of deposit. “It doesn’t work,’’ said Gary Gozycki, the longtime CEO, “but they like to try.’’

Economy Co-operative, located in a former two-family home it shares with an insurance agency, is New England’s smallest community bank, and a vanishing remnant of another era. Squeezed by increasingly complex regulations, low interest rates, and other factors, Economy agreed last month to be acquired by nearby Haverhill Bank and become one of the larger institution’s seven branches when the deal closes at the end of the year.

“I hate to see it happen,’’ said Carol Denault, a clerk at the town light department next door and an Economy customer for 30 years. “It’s like losing a piece of Americana.’’

After the Economy name vanishes, customers and the community will lose an increasingly rare institution, where business is low tech, low key, and personal. The bank doesn’t make big money but still treats its customers like high rollers.

When Isabelle Sargent, 83, using a cane and leaning on her husband’s arm, stepped into the bank to make a deposit in her savings account recently, a teller greeted her by name and pulled out a chair for her.

Economy is one of the thousands of small US banks that have been forced to merge or close over the years as larger banks bought up their neighbors and squeezed out smaller competitors.

The number of commercial banks with less than $100 million in assets - those like Economy that typically only have a branch or two - has declined by 73 percent since 1992, according to the Federal Deposit Insurance Corp.

These banks are facing additional stress because of the weak economy, which reduces demand for loans, and ultra-low interest rates, which limit earnings from investing deposits in US Treasurys and other low-risk securities.

In Massachusetts, the total number of banks has shrunk to 162 from 288 in 1992.

In a recent report, Bart Narter, an analyst for Celent, a Boston financial consulting firm, predicted that the number of banks with less than $100 million in assets will likely decline by 6 percent annually over the next several years.

Typically, Narter said, banks need a few hundred million dollars in assets to keep up with the growing regulations, new technology, and new products, such as mobile payments, that customers demand. “The future for the smallest banks in the United States is not bright,’’ Narter wrote in his report.

Economy had just $24.1 million in assets at the end of June, the smallest of any traditional bank in New England. By contrast, Bank of America, the biggest bank in both the state and the country, had $2.3 trillion in assets, 5,700 branches, and nearly 18,000 ATMs

Economy Co-operative’s earnings have shrunk in recent years, to $16,000 in the first six months of this year from $63,000 in the first half of 2006, but it is faring better than many other small institutions. About one-third of local banks with less than $100 million in assets were losing money at the end of June, compared with 6 percent of larger institutions, according to the FDIC.

“I think there is going to be a lot more consolidation,’’ said Gozycki.

Economy Co-operative was founded in 1889 to help support the town’s residents and businesses. For years, it operated in the basement of Merrimac Savings Bank, a larger competitor with two branches. But in the 1970s, Economy moved across the street into a former two-family home, where today a sign in front displays the time and temperature.

Like other tiny banks in the region, it has no evening hours and closes at noon on Wednesdays. The office is usually busiest during the three hours it is open on Saturday morning.

While other banks built bigger and bigger networks of branches and ATMs, Economy relied on personal service rather than size or technology. Forget big ad campaigns. The bank, with 2,500 deposit accounts and 250 outstanding loans, gives away potholders and tubes of lip balm stamped with its name to spread the brand.

Nancy Sevigny, 41, a teller who has worked at the bank since she was 19, described the relationship between the bank and its customers as family. “You know everyone who walks through the door,’’ she said.

Gozycki has run the bank for 27 years. He answers his own phone, fills out all documents for regulators, and handles every loan himself. If customers want a loan when Gozycki is on vacation, they either have to wait until he gets back or go elsewhere. At times, he shovels snow on the walkway, changes light bulbs, or fixes plumbing problems in the building.

“I don’t have a secretary,’’ said Gozycki, who estimates he works 60 hours a week. “I don’t have an assistant.’’

Gardner Sargent, 89, visiting the bank with his wife, said he has been a customer since he was a boy, and was saddened to hear about the merger. “I can’t say I approve’’ of the merger, Gardner said, “but I can’t do anything about it.’’

After the sale, when Economy’s name disappears, Gozycki, 57, plans to retire from banking. Haverhill Bank chief executive Thomas Mortimer said he plans to retain all the tellers and continue the commitment to the community. He also expects Haverhill Bank to make roughly $10,000 a year in donations to community organizations in Merrimac, as much or more than Economy could afford.

“I hope customers give us a fair shake,’’ Mortimer said.

Haverhill also plans to expand the services, offering commercial loans and telephone banking. And it’s making one other addition in Merrimac. The bank is installing an ATM.

Todd Wallack can be reached at