Another bank merger hits home
Impact on local Flagship customers from Chittenden-People's merger should be minimal
The banking industry has seen its fair share of consolidation, but there's still more room for takeovers as evidenced by the recent announcement that the parent corporation of Worcester-based Flagship Bank & Trust would be bought by a Connecticut bank with expansion plans.
People's United Bank, based in Bridgeport, Conn., plans a $1.9 billion acquisition of Chittenden Corp., a Burlington, Vt.-based bank holding company that owns Flagship and five other locally operated banks in four states, including the Bank of Western Massachusetts in Springfield. The cash and stock deal is expected to close by the first quarter of 2008.
News of the deal is yet another sign of added pressure on financial institutions to get bigger in order to survive, especially in light of the inverted yield curve, which has wreaked havoc on the bottom lines of every bank across the nation.
Chittenden even noted in its own annual report filed at the end of 2006 with the Securities and Exchange Commission that size in the banking world does indeed matter.
While bank acquisitions often mean the loss of jobs and choice for local customers, initial reactions from analysts predict that the People's-Chittenden deal will be less painful locally.
Gerard Cassidy, a bank analyst for RBC Capital Markets following Chittenden's performance, expects that there will be very little in the way of change as a result of the takeover.
Chittenden "is very well run," so there's no need for tremendous cutbacks, he said. Cassidy added, "People's also leans toward the conservative." In fact, Flagship will even retain its name after the deal is completed.
The other plus for local customers of Flagship is that there is currently no overlap between the markets served by People's and Chittenden. Up until recently, People's was restricted by its structure to growing within the borders of its home state. As a result there are no duplicate branches between the two banks that would result in redundancies - and therefore, branch closures.
"The two companies fit nicely together and there'll be very little in the way of disturbing the infrastructure of either company," said Mark Fitzgibbon, principal and director of research at Sandler O'Neill and Partners LP, an analyst who follows People's.
Under the terms of the merger People's will maintain Chittenden's model of operating small banking subsidiaries. "Our structure of separate local community banks in New England is one that is admired by People's Untied and will continue," said Paul Perrault, chairman, president and CEO of Chittenden, who will be part of the executive team leading the integration of the two companies' daily operations.
James Garvey, president of Flagship Bank, echoed the importance of maintaining Chittenden's model. Garvey said that operating small banks backed by the size of their owners is what differentiates Chittenden from the competition.
Garvey also said the transition will be invisible to customers. "It really is business as usual for us," he said.
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