A Rare Partnership Between Two Community Banks

When Neil Stevens first heard of Elberton Federal Savings & Loan Association in 2018, the mutual savings bank in the small community of Elberton, Ga., was struggling to grow and remain viable. 

Stevens, president and CEO of Oconee State Bank, which is based in Watkinsville, Ga., and had $545 million in assets at the time, had taken part in a roundtable with other bank CEOs, including Elberton Federal’s Daniel Graves. 

“[Graves] was talking about how they were struggling to make money because of their size and how he was having to do everything from cutting the grass to cutting payroll checks,” says Stevens. “He only had four people on his team, including himself.”

New option needed

Elberton Federal—which solely offered passbook savings accounts, residential mortgages and small consumer loans—had already exhausted other options, like merging with nearby mutual savings institutions, all of which turned down the offer to purchase the $25 million-asset bank.

Following that initial meeting, Stevens approached his investment banker with a question: Was there any way that Oconee State Bank, a stock savings association, could acquire Elberton Federal, a mutual savings association? As it turns out, it was possible. It would just take a lot of patience and paperwork. 

Stevens, a lifelong community banker, has consistently demonstrated a passion for giving back to the communities his bank serves. 

“It’s such a warm feeling to be able to invest in the community, to see them flourish and grow. There’s a lot of reward in that,” he says. “What I love about community banking is that I get to participate in giving back to our customers and our community.” 

Stevens realized that the town of Elberton—roughly an hour away from Watkinsville—would lose a bank that had been a part of the community since 1922. He knew he had to help.

However, there was one issue: These types of acquisitions are rare. Known as a merger conversion, this transaction occurs when an existing stock institution or holding company acquires a converting mutual institution. 

According to the Office of the Comptroller of the Currency’s (OCC) licensing manual for mutual to stock conversions, “Merger conversions are unusual and infrequent due to the regulatory scrutiny applied to these transactions. The mutual federal savings association must provide support that the merger conversion is the only viable alternative and document other proposed solutions the FSA pursued. This includes support that the standard conversion is not economically feasible and not a viable option.”

Oconee State Bank and Elberton Federal felt like they had a strong case, and in January of 2021, they submitted their merger conversion application to the U.S. Securities and Exchange Commission and the OCC. Then, there was radio silence. 

More than a year later, Stevens was at a conference in Washington, D.C., listening to a speech by acting comptroller of the currency Michael Hsu when he got a text from Graves. It read: “My attorney said our deal is going to be escalated to comptroller Hsu sometime next week.”

“I replied, ‘You’re not going to believe this, but I’m sitting here listening to Hsu speak,’” Stevens recalls. “I made a beeline to Hsu after the speech was over. I introduced myself and told him what we were doing. I said, ‘[We are the best alternativefor them]. This community needs a bank, and it’s going to better serve the community.’” 

Hsu thanked Stevens for his input, but it would still be about eight more months before Oconee State Bank and Elberton Federal received their final approval to move forward with the acquisition. 

“Elberton Federal would have folded, and the SEC finally came to the conclusion that this was the only viable option,” Stevens says. “It was good for Elberton because they were able to become part of our culture and everything we do. It was good for the community in Elberton because now their customers can be better served, and it was good for us because we were in a new market. It was a long, arduous process, but it was a big win.”

“[The merger] has been such a blessing for the community. You’re going to see a small bank in that community give back in ways that they never could have done without this merger.”

—Neil Stevens, Oconee State Bank

Deepening the community connection

The transaction was completed on July 31, 2023, and on Sept. 18, Elberton Federal reopened as a branch of Oconee State Bank. 

In the stock offering required by merger conversion regulations, Oconee sold 149,015 shares of common stock, at a discounted price of $28.94 per share, to depositors and borrowers of Elberton Federal in a subscription offering, and to stockholders of Oconee and members of the general public as a community offering. Gross offering proceeds totaled approximately $4.3 million. 

As part of the merger, Oconee retained all of Elberton Federal’s employees. Graves was named senior vice president and community president of Oconee’s northeast Georgia market. The new branch brings Oconee State Bank’s number of locations to six, totaling $575 million in assets. 

“It has been such a blessing for the community,” says Stevens. “You’re going to see a small bank in that community give back in ways that they never could have done without this merger.” This includes expanding into the commercial banking space, an undeniable opportunity in Elberton, the granite capital of the world. 

“They’re such a close-knit group of people that care about each other, and they are all so connected to the Elberton community with ties that run much deeper than banking,” Stevens says. “Our plan is to continue to stay independent and carry on that legacy as time goes on.”