An Ohio mutual believes it is gaining momentum in a four-year-old effort to preserve small depositor-owned institutions.

First Mutual Holding, the parent of the $2 billion-asset First Federal Lakewood, agreed on Friday to acquire the $35 million-asset Blue Grass Federal Savings & Loan Association in Paris, Ky.

Blue Grass is the third mutual to agree to join First Mutual, which absorbed the $51 million-asset Belpre Savings Bank in August 2015 and the $48 million-asset Doolin Security Savings Bank in New Martinsville, W.Va., in May 2017. Belpre Savings and Doolin Security were struggling, losing a combined $902,000 in 2017, so First Mutual merged the two in May 2018.

Blue Grass, by contrast, is profitable, earning $108,000 last year and $85,000 through mid-2019.

First Mutual plans to let Blue Grass keep its charter and operate independently. The thinking is, by affiliating with a larger mutual Blue Grass can reduce its technology and marketing costs and gain an advantage when it comes to mortgages and small business lending.

“It gives us the competitive edge we currently don’t have,” Blue Grass President and CEO Shanda Smith said. “We want to take Blue Grass Federal to the next level for our current members, and attract new ones.”

First Mutual, led by President and CEO Thomas Fraser, has been able to improve the prospects of the other mutuals it has acquired.

First Mutual Bank, formed by the merger of Belpre Savings and Doolin Security, is modestly profitable, earning $65,000 in the first half of 2019. Its noninterest expenses over that time were 11% lower than what its predecessors’ operating costs were in mid-2017.

Smith, of course, wants similar results at Blue Grass.

“I’ve known [Fraser] for several years and we share a commitment to mutuality,” Smith said. “If we can affiliate with a company that shares our core values and grow, it makes sense.”

“Mutuals should be working together,” Fraser said. “This helps strengthen an already-strong mutual and keeps a vibrant charter independent.”

Fraser, who also chairs America’s Mutual Banks, a trade group representing depositor-owned banks, has emerged as a leading voice for preserving mutuals. In July 2018, Fraser stepped down as First Federal Lakewood’s president and CEO to focus exclusively on building First Mutual Holding.

The number of mutuals has been declining since the last new depositor-owned bank was chartered more than 50 years ago. The number of mutuals fell below 500 in 2018, finishing the year at 478, according to the Federal Deposit Insurance Corp. Of those, 94 had less than $100 million of assets.

A number of remaining mutuals formed mutual holding companies and sold minority stakes to investors. Depositors retain the majority ownership, preserving the mutual status, but over time many of those stock-traded mutual holding companies have converted to 100% stock ownership.

Fraser seeks to preserve fully mutual institutions. While First Mutual has the option to sell stock like other MHCs, Fraser said it has no intention of doing so.

“What we’ve found,” he said, “is that when part of control is turned over” to shareholders, “something fundamental changes.”