Salem Five Cents Savings Bank, founded in 1855, has more than $1 billion in assets.

After 20 years on the job at Salem Five Cents Savings Bank, William H. Mitchelson, chairman and chief executive officer, has handed the reigns over to successor Joseph M. Gibbons.

Gibbons takes the reins of an institution that has invested heavily in technology, and makes no secret of his intention to oversee a program of expansion in the near future.

Gibbons was elected CEO at the annual meeting of the bank in April, leaving his prior position as president and chief operating officer.

Mitchelson, who became CEO in 1995, characterized the move as a natural progression. “About a year ago, I took a look at the situation at the bank. [It’s] in the best condition it’s been in in the 20 years that I’ve been here,” he said. “Really there’s only one good time to make a transition, and that’s when two things happen. One is when the bank is in very good shape and two is when you have somebody on board you feel can more than ably handle the institution. I’m very fortunate to have my successor in hand,” he said.

Mitchelson will continue as chairman and as an operating officer for about 18 months as the transition evolves, but he won’t be riding off into the sunset after that, he said. “I will stay as a trustee and a member of the board of the bank. This has been really my life’s work and I’ve loved every minute of working with Salem Five. Staying on the board has been one of my goals,” said Mitchelson.

Gibbons and Mitchelson have worked together and shared the same vision of the bank for over 20 years. Gibbons will remain CEO of Salem Five Mortgage Co. and said he plans on leaving the position of president of the bank open for a time.

Getting the bank to a point at which Mitchelson felt comfortable relinquishing strategic control had been more than five years in the making, he said.

“We’re financially solid with record capital [and] a very conservative balance sheet,” said Mitchelson. Five years ago, the bank began making strategic moves to upgrade its technology and increase its product lines in order for the bank to be “relevant” into the future. The bank now is in the starter’s gate and positioned for a quick start in meeting challenges of the new millennium, he said

From its start in 1855, the mutual bank has grown to carry more than $1 billion in assets and has established other affiliated entities such as an outside mortgage company in 1985, Clippership Financial Services in 1996 and Clippership Insurance Services in 1999. Just in the past decade Salem Five also expanded into Internet banking with Directbanking.com, established in 1995. More recently, that online enterprise opened a physical virtual branch on Congress Street in Boston.

Driving the Train

Strategically, Salem has habitually gauged what kinds of products and services its customers will want 10 years from now, then looked backward for practical examples of how best to achieve those goals step by step, said Mitchelson.

But while many others have entered – only to later abandon – banking Web sites as separate entities from the parent bank, Directbanking.com has been one of the few with staying power. Mitchelson attributes that to a combination of early entry into the market, which helped to build brand equity, and customer loyalty.

“Additionally, we’ve also tried to introduce aspects of the Internet prior to our competitors. So folks like to stay with us because they know that if something will be of value added to them on the Internet, we will present that in a very timely fashion,” said Mitchelson.

“Trying to get into it [a stand-alone Internet banking business] today, it would be virtually impossible – everyone has a Web site and trying to distinguish yourself in the marketplace would be extremely difficult, if not impossible, and certainly costly,” said Gibbons.

“Really the primary initiative is to leverage everything we’ve put into place over the last three to five years,” said Gibbons of his goals as the new CEO. The bank has spent “tremendous dollars” investing in infrastructure, high-quality management and products and technology.

“We have an engine built here that can drive a much bigger train than we’re currently driving,” said Gibbons.

Gibbons puts growth projections at 6 percent to 7 percent per year, barring any future merger with or acquisition of another bank. “Obviously, if there’s an opportunity to acquire or a merger opportunity, then we’ll look at that as well and certainly our growth expectations under that would be significantly higher,” said Gibbons.

Currently the bank has “significant” capital would be well positioned to invest in an acquisition-based strategy. The bank has about 320 employees in offices along the North Shore and its one Boston location. Gibbons said the bank is looking to expand more into Middlesex County but has no specific acquisition or merger target on the table right now. Additionally, it plans to expand its Boston office “significantly,” he said. “We opened the Boston office a couple of years ago. It has been very successful and we believe there’s tremendous additional expansion opportunities in the core Boston marketplace as well,” said Gibbons.

Salem Five has 40 percent to 50 percent market share in its host community of Salem. Through a variety of online offerings, Gibbons said, the bank has customers in every state and 15 foreign countries. The mortgage company turned over about $670 million in business last year, said Gibbons. The brokerage arm of the bank manages $400 million in assets.

“I feel very good about the bank that I’ve inherited from Bill Mitchelson. Just looking back about 20 years ago, this was a $280 million bank with a $19 million surplus. Today, it’s a $1.3 billion bank with over $130 million in surplus. So I think that the track record here speaks for itself and we feel that we’re extremely well positioned to move into the future,” said Gibbons.

Gibbons said he doesn’t plan to immediately choose a new president for the bank now that he’s been elevated to CEO, citing a strong senior management team that will allow the position to remain unfilled for a time. “I would anticipate a need to fill that position at some point. It depends on how quickly the bank grows, how the economy performs; there are also some issues that are unknown that could put tremendous pressure if things were to change dramatically and certainly, at that point, I think I would advance that process,” said Gibbons. Attracting a high-performance management team is something Mitchelson said he’s extremely proud of. “We have a very participatory management style where many of the tactics are up to the individuals. The particular strategies are collectively determined but the tactics are individually prescribed. That’s permitted us a ‘smaller institution’ to attract higher-level executives who have an extremely high sense of entrepreneurial sprit,” said Mitchelson. “That gives me comfort that as I’m leaving; the folks here can carry on in a very, very distinguished manner.”

Going forward, both Mitchelson and Gibbons believe the bank has prepared itself well. “Many banks look good today but we believe they have not made the necessary investment to advance themselves as things continue to change at the current rapid rate,” said Gibbons.