Once known as the Colonial Candle building, 232 Main St. in Hyannis has been leased as the location for the Bank of Cape Cod. The image above shows how the bank will look.
The state Division of Banks recently OK’d several noteworthy applications by area institutions, including the approval of a significant step in the formation of a new bank and the merger of two longtime banking rivals.
On Jan. 31, the de novo Bank of Cape Cod moved a step closer to its planned opening in Hyannis. The bank received its Certificate of Public Convenience and Advantage, the first step in establishing a new bank. The next step will be to raise capital. The 29 original investors of the Bank of Cape Cod include bankers and business owners, public officials, restaurant owners and a former high school principal. All are involved in some sort of community role outside their new banking commitment.
Meanwhile, to the north of Boston, longtime rivals Heritage Bank and Salem Five Bank are merging, putting more than 100 years of competition behind them. The two Salem-based institutions received approval for the move on Feb. 10. Heritage will assume the name of its new partner.
The building at 232 Main St. in Hyannis used to be a well-known place to buy candles on the Cape. As early as this summer, the location where shoppers used to browse the selection of Colonial Candles is expected to house the Cape’s newest bank. Bank of Cape Cod organizers signed a lease for the space last October while anticipating getting a green light from the DOB.
Timothy Telman, Bank of Cape Cod co-founder and future president and CEO, said the next step is to raise $12 to $15 million in capital. The bank plans to begin offering between 1.2 million and 1.5 million shares to prospective investors this week.
But the goal is have local investors, said Telman. At $10 per share, bank leaders are hoping area residents and business owners will take part in helping to see the bank succeeds in their neighborhood. There is a minimum requirement for investors to buy at least 1,000 shares, but Telman said it is a unique opportunity and there has been a lot of interest. “What you need to do is get [community] investors, get people involved,” he said. “You build it with a local base.”
Telman, a former commercial banker and local businessman, has worked to bring the new bank to Cape Cod since 2004. Living on the Cape for the past 11 years, he said he has witnessed numerous changes in the Cape Cod banking business. Even though there are many bank braches on the Cape, he said, the number of institutions has dwindled and only a few of the players are locally based.
“Thirty years ago, there were 25 banks of the Cape. Today, there are only 12, and only three are based here,” he said
At the same time population has increased, and the Cape has become more of a year-round place of residence, evolving from a vacation or second-home destination, he said. Telman noted there are 10,000 small businesses on the Cape and said he hopes his new commercial bank will be seen as an asset and a viable option for local business owners.
James Crocker, one of the original investors, said several mergers in the local banking scene have created an opportunity for a new entity in the market.
Crocker, an elected member of the Barnstable Town Council, decided he wanted to be a part of the bank. He said the creation of a locally owned bank will fill a void in the community.
“I think it’s really interesting that all of our bank mergers on the Cape brought us to this point,” said Crocker.
Crocker is one of the 29 initial investors with ties to the community. He said the original group is well known to each other, and the grassroots connections have generated interest from other potential investors and future customers
“The word of mouth is spreading rapidly,” he said.
‘Meaningful Player’
David Cotney, senior deputy commissioner at the DOB, said there has been interest from several parties about starting de novo banks. Also recently approved was a similar application by the creators of Patriot Community Bank, which would be formed in Woburn. He said both banks have one year to raise the capital needed to officially open their doors. There are no other bank start-up applications before the division, but Cotney said he expects there will be more groups filing for such approval over the coming year.
“We have certainly had inquiries,” said Cotney.
The headquarters of Salem Five at 210 Essex St. and the headquarters of Heritage at 71 Washington St. are only a block from each other. For customers who like to shop around, the setup made it easy to compare rates and even try a little face-to-face bargaining.
Doris Murphy, senior vice president of Heritage, said bank employees were often asked if they could match what its competitor was offering down the street.
Kim Meader, executive vice president of business lines at Salem Five, said the staff at his bank has been asked the same question.
“You could probably open one of our back windows and talk to someone at Heritage window to window,” said Meader “At the same time you’re rivals, you also have a great deal of respect for each other. It’s one of those things where the right time came around. Why not do it together? It will just make us a better competitor.”
The Heritage facility on Washington Street will become the bank’s main branch, while Salem’s Essex Street building will become a corporate office and meeting facility without a retail banking component.
While the DOB has approved the merger, it will not be until late March when the two banks’ systems are intergraded.
The merger will make Salem Five a 19-branch operation. Meader added that there is also a no-layoff policy in effecting the merger.
“We will relocate some offices, but we don’t want to take a step backward” in terms of retaining talented staff, he said.
Over the next three to five years, the bank plans to continue to grow, Meader said. The goal is to go from 19 to 30 branches in that time while expanding geographic coverage and products, he said.
He said the merger should ensure customers of both banks that the combined institutions will stay around and are unlikely to be acquired by a larger financial institution
“There is a special opportunity in the marketplace for a large independent mutual bank,” he said. “It makes us a much more meaningful player in the marketplace.”
Joining forces also should also ease some of the pressures smaller banks face under the growing regulatory burdens that have strongly impacted the cost of doing business in recent years, Meader said.
Most community bankers have been struggling with the cost of compliance with an increasing number of regulations that are said to cause the most difficulties for smaller banks with fewer resources.
“The regulatory burden on a smaller institution is pretty difficult. It was getting more and more difficult,” said Murphy. “We always did our best as a small bank to keep up with the [changes in the] industry.”
Both banks, although still not large in comparison to many of their competitors, have been household names in the community for a long time, giving them a different advantage.
“Both Salem Five and Heritage have been around for well over 100 years,” said Meader. “It [the merger] really extends our reach. We can adopt a longer time frame to see our investments take hold.”
Murphy said some people may have been surprised to learn the banks were merging since both have been part of the community – and well-known rivals – for so long.
“We’ve always had a good relationship with them even though they were right around the corner and our competitor,” said Murphy. “We think that in the long run it will work out well.”
