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Banking and Financial Services

Branching Out — Again

Matt Sosik

Matt Sosik says Hometown Financial Group’s latest acquisition, like those that came before it, is all about creating scale at a time when that quality is critical to growth and even survival.

A “survival tactic.”

That’s one of the phrases Matt Sosik, CEO of Hometown Financial Group Inc., the parent of bankESB, used to describe Hometown’s announced plans to acquire Randolph Bancorp Inc., the latest in a series of moves by Hometown to expand through acquisition.

Elaborating, Sosik said this acquisition will certainly give Hometown, the multi-bank holding company for Abington Bank as well as bankESB, a larger, stronger footprint on the state’s South Shore. Indeed, Randolph Bancorp is the holding company for Envision Bank, which will merge with and into Abington Bank to create a $1.4 billion institution with 11 full-service retail locations across the South Shore, including the towns of Abington, Avon, Braintree, Cohassett, Holbrook, Marion, Randolph, and Stoughton.

But the primary reason for this acquisition, as well as the other five undertaken in just the past seven years, he told BusinessWest, is to achieve something that is becoming ever-more critical in today’s banking climate: scale.

“Banking has become such a low-margin business that scale is absolutely critical,” Sosik explained. “We aren’t running our company to survive three years or five years; we’re running to survive 20 and 30 years. We want to be a relevant player in all our markets, and we want to ensure our long-term survival, and to do that, scale is the name of the game.

“We’re not seeking this growth because it makes us feel better or because it allows us to pump our chest out,” he went on. “This is a survival tactic in this business.”

With this latest acquisition, which is expected to be finalized by the fourth quarter of this year, Hometown will have consolidated assets of approximately $4.4 billion and a branch network of 38 full-service offices across Massachusetts and the northeastern part of Connecticut. The move will make Hometown the 10th-largest mutual banking company in the country.

“We aren’t running our company to survive three years or five years; we’re running to survive 20 and 30 years. We want to be a relevant player in all our markets, and we want to ensure our long-term survival, and to do that, scale is the name of the game.”

“That’s scale — that’s about us being one of the survivors when the dust eventually settles,” said Sosik, reiterating, again, the need for size in a changing, still consolidating banking and financial-services sector, where competition is growing — and evolving.

“I talk about low margins and scale, but there’s a dynamic that’s ever-increasing; we now have competitors that aren’t just credit unions or banks,” he went on, listing players such as SoFi, Chime, and others. “The non-bank competition is out to steal our lunch, and to an extent, they will be successful. But we need to be able to play in their space, and that takes scale, too.”

Hometown’s acquisition of publicly traded Randolph Bancorp will provide more of that scale, said Sosik, noting that talks between the institutions started last fall and quickly intensified.

Under the terms of the merger agreement, which has been unanimously approved by both boards of directors, Randolph shareholders will receive $27 in cash for each share of Randolph common stock. The total transaction value is approximately $146.5 million.

This transaction will be the sixth strategic merger for Hometown in the last seven years. In 2015, Hometown acquired Citizens National Bancorp Inc., based in Putnam, Conn., and then merged with Hometown Community Bancorp. MHC, the holding company for Hometown Bank, in 2016. It then acquired Pilgrim Bancshares Inc. and Abington Bank in 2019, and later that same year merged Millbury Savings Bank with and into bankHometown.

Like those other acquisitions, this one will enable Hometown to achieve needed additional growth quickly and effectively, Sosik said.

“From the Hometown Financial Group perspective, this is a move that allows us to grow with very little additional cost,” he told BusinessWest. “This particular acquisition is going to be extremely efficient for Hometown.”

And, as noted, it will give Hometown a much larger and stronger position in a very competitive banking climate on the South Shore.

“With the addition of Envision Bank, we more than double our full-service locations and assets in Eastern Massachusetts,” he explained. “This dramatically increases the branding power we have on the South Shore, as well as market share.”

One matter still to be determined — and there is time to make this decision — is what name will go on the new entity, said Sosik, adding that both brands (Envision and Abington) have value and cache in that market.

“We’ll try to figure out what’s the best brand in that market for that combined bank,” he said. “We want to be thoughtful about that, and we’ll give it some thought.”

Meanwhile, the search for additional strategic acquisitions and partnerships with like-minded acquisitions will continue, he added, because scale will only become more important in the years and decades to come.

As he said, it’s a survival tactic.

 

— George O’Brien

Banking and Financial Services

A ‘Natural Partnership’

Chris Milne, left, and Mike Matty both say the union of St. Germain and Gage-Wiley is a natural partnership.

Mike Matty says the talks with Chris Milne began roughly two years ago.

And as they often do in such cases, these discussions were somewhat intermittent in nature and came in varying degrees of intensity.

“With those first preliminary talks, you talk, then you stop talking about it for a little while, you revisit it … it’s been percolating for a while,” said Matty. “Half the time, it’s just … you grab dinner or you grab a beer and chat about business more than anything else, primarily because the companies are so similar and dealing with the same issues and you want to see how they’re dealing with these issues. And then, the talk would turn to ‘are we still thinking about this, or are we not thinking about this?’”

‘This’ was a proposed acquisition of Northampton-based Gage-Wiley & Co., which Milne served as president and CEO, by Springfield-based St. Germain Investment Management, which Matty has led for a number of years now. And eventually, the talk led to a deep dive and a decision to go forward.

The combined company has close to $2.4 billion in assets (Gage-Wiley had nearly $800 million), and four offices overall — St. Germain has a second office in Lee, and Gage-Wiley has a second office in Plymouth. This means it has much-needed size at a time of increased — and more complex — regulation, but also a small-enough size to remain nimble. Just as important, it now has nearly two centuries of time in the investment-management business.

Indeed, Matty joked that Gage-Wiley was a little on the young side in comparison to St. Germain, with the former being only 87 years old and the latter 96.

“I realize they’re a fairly new upstart, since they only started in 1933,” said Matty, who then turned serious and called this a “natural partnership.”

Natural because the companies are so similar — they both were started in Springfield, they’ve both remained locally owned and privately held, and they have similar operating philosophies.

Milne agreed. He actually initiated those talks two years ago, not thinking they might eventually lead to this union. Like Matty, he said the early discussion was focused on simply how to do business in a changing environment.

Eventually, though, it became clear that coming together made far more sense than staying apart and competing with each other.

“It’s a case where one plus one equals three,” said Milne. “It seemed like the right thing to do at the right time and for the right reasons; the similarities and compatibility were just too good not to get married.”

The name ‘Gage-Wiley’ will remain over the door of the facility in Northampton, and Milne will serve as managing director, because that brand is well-established, and it made no sense to change it, said Matty.

“I realize they’re a fairly new upstart, since they only started in 1933.”

“There’s a lot of good will built into that name and client relationships built up over time,” he told BusinessWest. “It’s very strong name, and we have no intention of disrupting things and taking all that away from them.”

Thus, in many ways, that office will operate much like October Mountain, St. German’s subsidiary in the Berkshires — a firm with its own name and its own staff, but with a bigger organization behind it.

“Very little, if anything, will change,” said Matty. “From the Gage-Wiley client standpoint, their statements look almost identical to the way they looked before — there just happens to be a new line that says ‘securities offered through St. Germain Securities’ on it. The phone number is the same, they’re talking to the same people … from the client standpoint, it will be almost invisible.”

Beyond the size and wealth of experience the combined firm now boasts, however, it also has what Matty described as a deeper pool of talent and expertise that it can bring to the table to better serve investment clients.

Elaborating, he said the teams at the respective companies bring experience in different areas that will complement each other effectively.

“We bring to the table for them a fixed-income expertise that they didn’t have, and we also bring more resources on compliance, legal matters, and human resources,” he explained. “And that comes with being a bigger company and having to tread these waters for a longer time with more people — we’ve had more experience at it.”

Meanwhile, Gage-Wiley brings different elements to the table, starting with some operational processes and ways of doing things that are in some ways better than those at St. Germain, Matty noted.

Gage-Wiley also brings an expertise in what is known as ESG (environmental, social, and governance) investing, a mindset that is growing in popularity, especially among the younger generations.

“Many people are looking to invest according to their ethics,” said Matty, noting that years ago the acronym for this philosophy was SRI — socially responsible investing.

But there is a difference, he went on, adding that SRI was mostly an exclusionary approach — ‘here’s what we’re not going to buy’ — while ESG is more of an inclusionary approach.

“People will say, ‘here’s a company I want to see a change at — I’m going to buy some of its stock, see if I can be a shareholder activist, and see if we can make some changes from within,’” he explained. “It’s a more comprehensive approach than the old SRI.”

And the team at Gage-Wiley, based in Northampton, has developed an expertise in this realm that St. Germain did not possess.

It does now, though, because of this ‘natural partnership’ that Matty described, one that brings nearly two centuries of local ownership together under the same umbrella — if not the same name and same roof.

As noted, this union gives the combined company more size and the important element of flexibility. But it also provides something else — stability and staying power during an ongoing time of consolidation within this industry.

“We’re going to stay independent,” Milne said. “And we’re now the perfect size — we’re not too big, and we’re not too small, and we’re not going anywhere.”

—George O’Brien

Banking and Financial Services

What’s in a Name? Plenty

Mike Buckmaster

Mike Buckmaster, vice president of Commercial Lending for Community Bank, N.A.

Since entering the market in 2017 through the acquisition of Merchants Bank and its branch in Springfield’s Tower Square, Community Bank, N.A. has been working to build on its foundation in this region. It brings to the highly competitive local banking landscape both considerable size and an operating mindset commensurate with the name on the letterhead.

Mark Tryniski acknowledges that it sounds illogical that a financial-services institution with $12 billion in assets and more than 230 branches could call itself a community bank — let alone call itself Community Bank, N.A.

But Tryniski, president and CEO of the Syracuse, N.Y.-based institution, said ‘Community Bank’ represents more than a name — and one that fits. Indeed, it’s more like an attitude.

“As our name suggests, we’re a community bank — that’s how we’ve always operated,” he explained. “And when you put the name ‘Community’ on your bank, you’d better function as a community bank — and we do.

“There is such a thing as a community-bank model,” he continued. “You push authority down to people in the branches, as opposed to the big-bank model, where you walk in the door looking for a home-equity loan and they put you on the phone with a 1-800 number and someone working in another country. Community banks don’t do that.”

Mark Tryniski

Mark Tryniski

 “When you put the name ‘Community’ on your bank, you’d better function as a community bank — and we do.”

This operating mindset has enabled the institution to grow considerably over the past several years and into a number of different markets, including Springfield, accomplished through the acquisition in 2017 of Merchants Bank, which had previously acquired NUVO Bank, which operated a single branch within the 413 within a large footprint in Tower Square.

Since putting its name over the door on Main Street, Community Bank, N.A. has downsized that space considerably, while simultaneously working to establish itself and broaden its horizons within this market.

It has done so by essentially living up to the name over the door, said both Tryniski and Mike Buckmaster, vice president of Commercial Lending. They both said the institution possesses the formula that’s required to succeed today — a community-bank feel, but a large size that is necessary in a changing, quite challenging financial-services marketplace today.

“I think that, over a period of time, the market has accepted the fact, to a degree, that this is a consolidating industry,” said Buckmaster, who has logged more than 30 years in the banking industry, locally and in the U.K., and has carried business cards bearing the logos of NUVO and Merchants Bank, among others. “The differentiating factor tends to be the commercial banker, and if the commercial banker can continue to deliver in terms of service and business development, there tends to be a good degree of customer loyalty toward the banker, even through various acquisitions.”

That lengthy explanation helps explain why the Springfield facility has been able to enjoy steady growth in its portfolio even as the name on the wall of Tower Square has changed several times this decade.

Tryniski agreed, but said the combination of size and small-bank attitude is becoming ever more important as the consolidation movement continues without any signs of slowing down.

“I’ve been around the banking industry for a little more than 30 years, and there’s been a dramatic change in the banking landscape, mostly centered around consolidation,” he explained. “When I started, in the ’80s, there were 16,000 or 18,000 banks; now, there are roughly 6,000 banks.

“And I think the trend toward consolidation will continue because of efficiencies that can be garnered by scale and technology,” he went on. “The bigger you get, the more you can justify investments in technology to give you more efficiency. It’s hard for the smaller banks — you have to really be efficient and disciplined.”

Overall, Community Bank will look to get bigger still, and is looking at opportunities to expand within the Western Mass. and Connecticut markets, said Tryniski, but “haven’t found what the right opportunity is yet,” as he put it. Elaborating, he said growth for this institution will continue to come as it has historically, through a mix of organic growth and acquisition, with more of the latter than the former, especially in areas with slow or no growth but more than enough competition, and Western Mass. certainly fits that category.

In such markets, growth can come only by taking market share from other institutions, he went on, adding that this is generally difficult to do. Community Bank has had a good amount of success doing just that, however, because of that aforementioned enviable combination of large size and smaller-bank feel.

Community Bank, N.A.

Mark Tryniski says Community Bank, N.A. will look for opportunities to expand locally beyond its location in Tower Square.

For this issue and its focus on banking and financial services, BusinessWest talked at length with Tryniski and Buckmaster about how Community Bank, N.A. has firmly established its presence in the local market and how it intends to secure additional market share and perhaps expand its footprint in the 413.

By All Accounts

Since acquiring Merchants, and therefore all its branches, Tryniski has visited Springfield on several occasions as part of his efforts to fully understand the broad geographic area served by the institution — one that stretches from the Northern Kingdom in Vermont to the Southwest corner of New York to the Lehigh Valley in Pennsylvania — and meet both team members and customers.

“We spend a lot of time on the road,” he said of the management team at the bank, adding that, when he does visit Springfield, or any other community served by the bank, he makes a point of learning as much about the region as he can.

In the City of Homes, he’s become familiar with some of the players within the business community, has found a few restaurants he likes, and is both impressed with and encouraged by the high level of energy he’s seeing in the central business district.

He said there are a great many similarities between Springfield and Syracuse, and in some ways, that has helped him understand the dynamics of not only the communities themselves, but the banking environment here.

“They’re remarkably similar, actually,” he said. “They have the same population, they have an industrial history, they have a stable-but-not-growing population, there’s a lot of education, the downtowns look very similar … they’re very much alike. Springfield feels to me like Syracuse.”

From a banking perspective, that means a community that, as he said, is experiencing comparatively little growth, population-wise and new-business-wise, and has a crowded field of competitors for financial-services products — banks and non-banks alike.

In this environment, operating with that community-bank model — but with roughly $3 billion in assets behind the institution — is what amounts to a competitive advantage — a large competitive advantage, said Tryniski.

“We tell our branch managers that we want them to be the president of the bank in their town,” he explained. “And we give them the authority to do that; we give them lending authority and authority around charitable contributions, fee waivers, fee adjustments, things like that. We try to vest as much authority in our branch managers locally as we can, and let them make decisions about their customers and their market.

“We probably have more of a community-bank business model than most community banks,” he went on, “because most don’t operate like that.”

However, in this market, there are still a large number of community banks — more than in many other markets — and this simple math requires that small-bank mindset. Meanwhile, the field of competitors continues to change and grow, thanks to technology, which has brought many non-bank players into the mix, said Tryniski.

“We compete now with all sorts of non-bank competitors on the lending side — for everything,” he told BusinessWest. “Whether it’s personal loans, business loans, car loans … it doesn’t matter what kind of loan you’re making, you’re competing against a multitude of other, non-banking enterprises. And the same is true on the deposit side as well.”

Buckmaster agreed, noting that, on the commercial-lending side, with all that competition, as well as all that consolidation, having a local address is not the same thing as having people who know the local market and have worked within it for years, if not decades.

“All that competition puts the emphasis very much on the banker and being able to provide the service and support growth going forward as clients need,” he said, adding that Community Bank is large and stable, and thus able to provide commercial-banking products of all sizes, including dollar amounts beyond the scope of many of the smaller community banks that populate the region.

The sweet spot for the bank, though, is loans between $1 million and $3.5 million, he said, adding that the bank is able and willing to continue writing loans for small-business owners, something the very large banks seem less interested in doing so.

This flexibility has enabled the institution now known as Community Bank, N.A. to continue to serve the customers added to its portfolio when it was NUVO, he went on, adding that loans have been written for businesses across virtually all sectors and for a number of commercial real-estate acquisitions as well.

“We’ve have some customers who were initially small back eight or nine years ago who have grown into significant customers that require a significant increase in loan support going forward,” he told BusinessWest. “We’ve seen some good growth in commercial and industrial customers over that period of time, and in addition, we’ve also seen significant new dollars in different types of commercial-investment real estate, whether it be locally in Western Mass. or further afield.”

Worthy of Interest

Returning to some of those numbers mentioned earlier — the 230 branches and current status as the 125th-largest bank in the country — Tryniski said they certainly make Community Bank, N.A. sound big. And it is.

“But we’re a lot close to the smallest bank in the country than we are to the biggest, even though the numbers say we’re one of the biggest,” he noted, adding that, in today’s banking climate, it’s not how big a bank looks on paper that matters, but how big it acts in the markets it serves.

And with that as the benchmark, this institution does indeed live up to the words on its stationary and over those 230-odd doors.

George O’Brien can be reached at [email protected]

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