Banknorth’s Connecticut headquarters in Glastonbury (above) will be moved into American Savings Bank’s former offices in New Britain.
With the finalization of Bank-north Group’s acquisition of New Britain’s American Financial Holdings a week away, the Portland, Maine-based bank is already looking down the road at its financial future.
Banknorth President, Chairman and Chief Executive Officer William J. Ryan said that much of Banknorth’s future is in Connecticut. He predicted that soon the company will be holding assets of $40 billion, stressing that most of the growth in the next three years will be in Massachusetts and Connecticut.
Aside from Southern New England, Ryan said there is likely to be expansion in Upstate New York where Banknorth currently owns Evergreen Bank. Since it already holds down top slots in Maine, New Hampshire and Vermont, Banknorth will see little external growth in those states.
“The last couple of years our focus has been on growth in Massachusetts and Connecticut. The southern portion of New England is more populous, wealthier, faster-growing,” said Brian Arsenault, Banknorth senior vice president of corporate communications. “We continue to have interest in expanding both in Southern Massachusetts and in Connecticut.”
Ryan was also quick to point out that Banknorth has no plans to become a major city player anytime soon.
“We just see ourselves as a local community bank,” he said. “You won’t see us growing in Boston or Hartford or New York City. That’s just not our personality.”
“I think Connecticut views Banknorth as the [mergers and acquisitions] juggernaut of the Connecticut banking industry,” said John Carusone, president of the Hartford-based Bank Analysis Center. “I also think that many Connecticut institutions view them as an attractive partner with whom to affiliate.”
Carusone added that Banknorth has proven to be competitive from a pricing standpoint, whereas many of the in-state banks are “wishing to trade on the cheap.”
Banknorth’s newly acquired branches are principally located in Northern Central Connecticut, mostly in Hartford County. Bank-north will now be the No. 3 bank in that county, and Arsenault said Banknorth typically likes to be in the top three.
Carusone noted that to date, Banknorth has focused on Central Connecticut, geographically surrounding the capital of Hartford and leaving a lot of other markets yet to be examined or penetrated.
“I would expect that Connecticut would be an important part of their aspirations to be a regional banking powerhouse,” said Carusone. “I don’t think you can be a New England bank without being a major presence in Connecticut. Right now [Banknorth has] a little over $4 billion in one market: Hartford County. If they aspire to be a true statewide player in most of the major markets, they need to think about doubling that market position.”
He speculated that in order to be a competitor with the two largest in-state banks – People’s Bank and Webster Bank – each of which has assets of approximately $12 billion, Banknorth will need Connecticut assets of roughly $8 billion.
Banknorth officials stated that they aren’t ruling out opportunities in the other counties.
“We probably won’t go into Fairfield County because that area is already well covered by the Greater New York metro market,” said Arsenault. “We’d like to have the No. 3 market share probably everywhere else and we’ll continue to look for opportunities.”
‘Huge Jump’
When it comes to selecting a bank ripe for acquisition, Arsenault said that the process is very opportunity-driven. Bank-north has acquired six banks in the last 15 months, which is something Arsenault “never would have dreamed could happen.” He added that it wouldn’t be surprising if the bank went six or nine months without acquiring another bank: “The pricing is running a little high right now, and a couple banks that we’re interested in don’t seem too interested in selling.”
As Banknorth grows, so do thoughts of consolidation and a possible sale of the bank.
Arsenault said Banknorth officials aren’t actively looking to sell the company, but added it isn’t entirely out of the realm of possibility.
“If you’re in the banking industry you have to realize that if consolidation is going to continue, then before long somebody is going to knock on our door. But we haven’t hung a ‘for sale’ sign out, and we’re still happy running the company,” he said.
Banknorth started as a small community bank back in the early 1990s, with assets of approximately $2 billion in 1993.
“We felt we had a pretty good community bank model that worked well in Maine and thought we could take it through New England,” said Ryan. “It’s been just an extraordinary road,” he added, noting that Bank-north has acquired 21 financial institutions during the last 10 years. Most of those acquisitions have taken place in New Hampshire, Vermont and Massachusetts.
All of the acquired banks have followed a similar pattern. Each has been a well-run community bank that has grown to a size where more growth would be difficult to sustain.
“We can add all of the products and services that they can’t afford due to size,” said Ryan, adding that American Financial, parent company of American Savings Bank, was the same story. Banknorth will finalize the acquisition of American Financial, and American Savings Bank, on Feb. 14.
Banknorth arrived on the scene in Connecticut a few years ago, acquiring Glastonbury Bank and Trust in 1998 and then Southington Bank in the fall of 2002. At that time, Banknorth was ranked the 15th-largest bank in the state, holding down barely more than a dozen branches.
Banknorth’s latest acquisition will include all of American’s 34 branches. That will give Banknorth almost 50 in Connecticut, making it the fifth-largest bank in the state.
“This represents a huge jump for us in terms of offices and market share,” said Arsenault, adding, “We’ll obviously become a much more significant player in Connecticut with $4 billion in assets.”
“There has been some concern on the part of the financial community that Bank-north has been so aggressive in its acquisition strategy that they may have a lot on their plate to digest. There are some who say Banknorth needs to pace itself,” said Carusone.
With the completion of the acquisition in February, Banknorth will be worth approximately $26 billion, but Ryan isn’t ready to stop there.
“We want to be too big to be small and too small to be big,” which is Ryan’s basic philosophy of Banknorth and where it’s headed. He said that he wants to keep the personal touches of a small-town bank while providing the added benefits and services of a larger city bank.
American Savings Bank fits right in with the bank’s plans, said Ryan, stressing that he and American’s Chief Executive Officer Robert T. Kenney have known each other for several years.
“I want the banks to be big enough to offer sophisticated products and services, but small enough to keep local decision-making in place. It’s a fine line we’ve been straddling,” said Ryan.
Carusone believes that Banknorth has the opportunity to add another $3 billion or $4 billion to its assets in Connecticut. He said he understands Banknorth’s decision to stay out of Fairfield County, which already is a fiercely competitive market insofar as the banking industry is concerned.
Carusone was hesitant to say what the next move for Banknorth should be, saying, “There are a couple of key acquisitions Banknorth could make. There are a number of important markets in which they aren’t yet represented, and their most important acquisitions have yet to be made.”
Arsenault noted that at $2.9 billion, American Savings is slightly larger than Banknorth’s typical acquisition. Usually, he said, it acquires banks in the $500 million to $1 billion range.
Banknorth’s largest acquisition was Banknorth in Vermont, valued at $4 billion, followed by New Hampshire’s CFX Corp. for $3.2 billion.
“We’ve had experience in this sort of acquisition before,” said Ryan.
Banknorth’s Connecticut headquarters will be moved into American Savings’ former offices in New Britain. However, most of the back-office tasks will be performed out of offices in Massachusetts and Maine.
Most of the staff “that deals with customers” will be retained at the American branches, according to Arsenault. Signage on the banks will now read Banknorth Connecticut, and the branches should be fully dressed by spring.
