With its acquisition of New England Bank (NEB), United Bank is the latest Massachusetts institution to push its way south into the Nutmeg State.
So what’s so great about Connecticut? What does United see when it looks south?
It sees a state that is smaller, but not so different culturally or socially from Massachusetts. It also sees a market much less cluttered with mutually chartered community banks. The competition is fierce, but the opportunities are more abundant and obvious.
“There’s room for another entrant,” Keith Harvey, United’s executive vice president of operations and retail sales, told Banker & Tradesman. “In Hartford County, Bank of America has got a 48 percent market share. We don’t see that kind of domination (in Hampden County). Webster has 11 percent, TD has 7 percent. Peoples’ United has four-and-a-half percent. We see that as an opportunity.”
As part of its $91 million acquisition of NEB, United will get 15 branches and two administrative offices in Connecticut’s Hartford, New Haven, Tolland and Litchfield Counties. The bank also said it plans some de novo branching in the area.
A Big Market
Richard Collins, United’s president and CEO, said he and David O’Connor, New England Bank president and CEO, have “stayed in touch” for a number of years.
After United converted to a stock bank in 2007, it had what Collins called “a nice stockpile of capital” burning a hole in its pockets.
“Our investors expect us to use that capital, not just sit on it,” Collins told Banker & Tradesman. “We’re going to use it to expand.”
And when it does, it’s going to look either east or south, Collins said. When it looks north or west, United sees small populations and rural communities. To the south, it sees Greater Hartford, and “a strong footprint” beyond.
The New England acquisition is United’s first since it got into an all-out bidding war in 2008 with Pittsfield-based Berkshire Bank for Worcester’s Commonwealth National Bank. United won that battle, but what it found in Connecticut – without a hint of pushback – is even more attractive, Collins said.
The Hartford-Springfield market is larger and faster-growing than the Hampden County-Worcester market, Harvey said.
“The Hartford-Springfield market is the second largest deposit market in New England,” he said. “It’s $8 billion (Hampden County) versus $42 billion for Hartford-Springfield.” Deposits in the Worcester market totaled $12.3 billion as of the end of the first quarter, according to Federal Deposit Insurance Corp. data.
Hartford-Springfield “is a big market by just about any measure,” Harvey said.
Hartford County boasts almost twice the population as Hampden County – almost 900,000, compared to roughly 460,000 in Hampden County. But in the Hartford-West Hartford-East Hartford market alone, there are 28 banks. There are 20 in Hampden County as a whole.
Half the population and almost as many banks means that north of the border, “Competition is more intense,” Harvey said.
Matthew Sosik, president and CEO of Hometown Bank, which is based very near the Connecticut border in Webster, would agree with the folks from United.
“The banking scene is far less cluttered in Connecticut than in Massachusetts,” Sosik said. “There are simply far fewer banks down there.”
But Sosik takes it a step further. He suggested Massachusetts banks on the make may be forced to look toward Connecticut for merger and acquisition deals.
“The large majority of banks in Massachusetts are mutual, and most don’t want to convert,” Sosik said. “Since mutuals can’t be purchased by stock banks, there are naturally fewer opportunities to expand in Massachusetts.”
‘Situational Opportunities’
Connecticut, on the other hand, is home to a number of stock banks of a size that makes them attractive merger and acquisition targets, including Collinsville Savings Society; Fairfield County Bank; Farmington Bank; Litchfield Bancorp; Naugatuck Savings Bank; Northwest Community Bank; Rockville Bank; Citizens National Bank; Putnam Bank; Savings Institute Bank and Trust Co.; Eastern Federal Bank and Naugatuck Valley Savings and Loan.
“The markets are not terribly different, although Connecticut is perceived to be wealthier and to have greater potential for growth,” said Kevin Handly, a banking attorney with law firm Pierce Atwood LLP in Boston.
A good relationship and a good fit between banks is still equally or more important than market conditions, Handly and Sosik both said.
“The expansion of the Massachusetts banks into Connecticut reflects, most importantly, specific situational opportunities,” Handly said.
Recent adventures into Connecticut “are less about geography and are more a reflection of a unique opportunity for the acquirer and the right time to sell for the acquired,” said Sosik.
It’s all the better for United that it can capitalize on a longstanding relationship with New England Bank at a time when perception among Massachusetts bankers is that Connecticut’s banking market is both growing, and less dog-eat-dog, than the Massachusetts market.
And when United looks around its new Connecticut stomping ground, who will it see? Berkshire Bank. The old foe from the Commonwealth National bidding war closed its acquisition of the Connecticut Bank & Trust Co. just before United announced its acquisition of New England Bank.
“They know what they’re doing, and so do we,” Collins said. He said the two banks exchanged “calls of congratulations” for the acquisitions, and called the relationship between the two “competitive, but friendly.”
“You don’t have to be a rocket scientist,” Collins said, “to look around and see what are the most attractive markets and which are the most attractive banks in those markets.”
