Kevin Bottomley, president and chief executive officer of Danversbank, visits the NASDAQ tower in New York on Jan. 16, the day Danversbank began trading as a public company.
Two North Shore banks have large sums of money “burning holes in their pockets,” in the pithy words of one industry observer, following transitions to become fully or partially stock-owned institutions this month.
The $64,000 question, in today’s competitive banking world, will be how the two competitors will invest what they’ve raised.
“We want to look for opportunities of expanding our franchise along the [Interstate] 93 and Route 1 corridors,” said Richard J. Gavegnano, chairman and chief executive officer of Meridian Interstate Bancorp, holding company for East Boston Savings Bank, which on Wednesday rang in its first day of trading on NASDAQ.
EBSB gained $100.5 million in new capital in stock sold in December and January, in which 45 percent of the bank went public.
Gavegnano declined to say where, specifically, the 160-year-old EBSB might be interested in expanding, but said the question will be studied and decided over the next year or two.
“We are used to having a good capital position,” he said, adding that EBSB “will continue to carry on [its] culture in a very disciplined, conservative way.”
Danversbank Chief Operating Officer Jim McCarthy, whose institution gained $172 million during its full conversion to a stock-owned structure this month, said Danversbank may be interested in acquiring non-bank businesses, such as insurance or wealth management firms, whose business could be enfolded in the bank’s.
“We’re talking about non-interest income acquisitions. Banks are so susceptible to interest-rate variations that it’s great to have some earnings come from non-interest,” he said.
While Danversbank and East Boston Savings are in the same market, McCarthy said, “I don’t think you’ll see us bidding on the same [businesses].”
But Danversbank also is interested in adding staff to its commercial lending group, and adding commercial accounts, he said, since they tend to have more fee-associated activity – another source of non-interest income.
East Boston Savings also hopes to expand commercial lending. That growth will include the addition of a new commercial and industrial lending department, according to Gavegnano.
Investment Options
Acquisitions, adding de novo branches, and pursuing new or unique investment streams such as investment management arms or reverse mortgage specialties are three of the major ways banks with capital to invest will look to do it, said Richard Schaberg, an attorney and managing partner at Thacher Proffitt & Wood in Washington, D.C., which advised Danversbank’s investment bank underwriter in the conversion, Sandler O’Neill & Partners.
Fully or partially stock-owned banks can only acquire or be acquired by other stock-owned banks, Schaberg noted, pointing out that nine North Shore-area community banks are stock-owned – although a few of those institutions are not publicly traded.
Don Fournier, chairman, president and chief executive officer of stock-owned Beverly National Bank, said his $375 million, 206-year-old bank isn’t interested in being acquired.
“We were founded as a stock bank and our intent is to remain an independent community bank, catering especially to small business,” he said, adding that if anything, he thinks of Beverly National more as an acquirer than the other way around.
Fournier predicted that East Boston Savings and Danversbank will both find out that it’s easy to say you want to acquire something, but harder to find the right cultural fit.
Rockport-based banking strategy consultant Bill Kozak, president of WTK Assoc., said he believes that no matter how either bank ends up investing its capital, investors who purchased stock in either one of the recent transactions actually may do better than those who bought bank stock a year or two ago.
That’s because they have purchased more of the existing bank capital for less than would have happened in past transactions, when the market was doing much better, he said.
