Taking Stock

Hampden Bank President Tom Burton and an entourage of officers and board members were in Times Square late last month for a ceremonial ringing of the closing bell on the NASDAQ, where the bank’s stock has been trading since last spring. Behind the pomp and circumstance, those same people have been hard at work crafting a business plan for what is certainly a new era in the history of the 155-year-old institution, but one marked by the same values and philosophies that have yielded steady growth in recent years.

Tom Burton started making phone calls back in late January. And he had to keep on making them well into the spring.

After all, it isn’t easy to earn the honor of ringing the ceremonial opening or closing bell on the NASDAQ Stock Market. There are hundreds of companies looking for that privilege and only so many days in a year, said Burton, president of Hampden Bank, who told BusinessWest that winning such a once-in-a-lifetime opportunity boils down to one thing: persistence.

His eventually paid off.

There he was on July 27, carrying out a short, simple, but very well-choreographed push of a button that ended what was, overall, another turbulent day in Times Square and on Wall Street. Actually, it was the end of the worst week the Dow had suffered in five years (a loss of 500 points over two days), and the NASDAQ Composite didn’t fare much better — a 1.4% slide that Friday, following a 2% drop the day before.

But there was much whooping and hollering as Burton and an entourage of 17 Hampden Bank officers and board members counted down the final seconds of the trading day inside NASDAQ’s elaborate studios — and it wasn’t because the bank’s stock price had managed to gain a nickel, to $10.25, by the closing bell.

Instead, those gathered were celebrating the 18-month-long process of getting to that July 27 pomp and circumstance and, more importantly, the promise of the future, or what Burton, in an wide-ranging interview with BusinessWest earlier in the month, called the start of a new era for the 155-year-old Springfield institution — one as a publicly traded bank.

Overall, though, while there is much anticipation about what will happen at the bank now known to investors as HBNK, very little has changed at Hampden since it completed its initial public offering six months ago, said Burton. It has roughly $50 million in new capital to work with thanks to that offering. It also has a new $3.4 million foundation with which it can make a real difference in the community. And it has stockholders to which it is now accountable.

But none of this really changes the bank’s operating philosophy, said Burton, nor does it substantially alter the bank’s basic game plan moving forward. Hampden had been enjoying steady, often double-digit growth over the past several years, he explained, and the conversion to a stock bank was simply seen as the most effective way to continue that pattern.

“The way we do business hasn’t changed,” he said, adding that the conversion simply offers opportunities to do more business, perhaps across more sectors, and probably in places the bank hasn’t done it before. “The business is still the same — it comes down to a focus on the customer.”

Like other banks that have made full or partial conversions to stock institutions in recent years, Hampden is now faced with the challenge of effectively leveraging the capital it has raised. While doing so, the bank will be “judicious and conservative,” said Burton, noting that options come in many flavors — including adding additional branches to the current roster of seven; being more aggressive in the commercial lending arena, which is facilitated by a larger lending limit; and possibly acquiring businesses in other financial services sectors, such as lending outfits and insurance agencies.

A business plan is being crafted that will eventually include some of those options, he said, adding that common sense will dictate how and when the bank carries out growth strategies.

In this issue, BusinessWest recounts an historic day in the life of Hampden Bank, but also takes a broad look at the months and years ahead.

Stock Answers

Hampden Bank board member Mary Ellen Scott, president of United Personnel in Springfield, was doing a little sight-seeing in Times Square about an hour before the bell-ringing ceremony when a television reporter put a microphone in front of her and started asking questions about the stock market and the miserable week that was mercifully coming to an end.

She thought her comments — broad statements about remaining upbeat and investing for the long term — were destined for some local broadcast. Instead, they became part of Katie Couric’s report that night on CBS. Such was the level of national angst concerning the markets, which, after enjoying a mostly prosperous 2007, were being taken down by a few bad earnings reports and the sad state of the housing market. (They did rebound somewhat the following Monday).

The troubles for the Dow and NASDAQ were certainly the topic of discussion in New York and practically everywhere else that Friday, but they couldn’t put a damper on the afternoon’s festivities, which climaxed a process that began nearly two years earlier.

Actually, Burton told BusinessWest, talk of making a conversion had been ongoing at the bank for several years. It had long been considered one of the options to continue what has been a strong pattern of growth — assets have more than tripled since Burton arrived in 1993 (from roughly $150 million to the more than $500 million today) — and, in early 2006, it was deemed to be the best option.

“Toward the end of 2005 we were talking about ways to get more capital to keep the momentum going,” he explained. “We either had to get more capital or we had to slow down, and we agreed that it would be very disappointing to slow down.”

The bank’s officers and board members considered several options, including full or partial conversion, and chose the former. The resulting IPO, one of the most successful bank offerings in recent years, was oversubscribed, eventually netting just over $50 million.

When considering how to invest that money, Burton said the bank will continue to operate in much the same way it has since its very humble beginnings as an institution created primarily to serve the working-class population of Springfield, especially those toiling for the Western Railroad.

The bank’s geographic reach and product lines (for most of its existence it handled only variable-rate mortgages and consumer loans) remained generally unchanged until fairly recently, when it expanded into other communities, added a line of commercial products and services, and fully embraced technology to allow customers to do banking when and where they wanted.

Throughout it’s history, said Burton, Hampden has taken its cue from its customers, and that won’t change now that its stock is traded on the NASDAQ.

“Any business, no matter how it’s owned, whether it’s private or public or whatever … if it’s not focused on its customers, it’s not going to be successful,” he said. “We’re always been driven by our customers, and we always will be.”

Trade Secrets

As he talked about leveraging the capital raised by the IPO, Burton used the words judiciously and conservatively early and often. He said the bank has already started to become more aggressive in the commercial-lending realm, which is an ultra-competitive sector, and one in which a higher lending limit — Hampden recently raised its in-house limit from $4 million to $10 million — is a real asset to any institution.

“That $10 million number represents probably 99% of the commercial activity in this market,” he said. “Now, we can do larger loans and better serve our customers, which is important because this is a very competitive commercial market that has a lot more players than it did years ago.”

As for additional branches, Burton acknowledged that many areas and specific communities are now heavily banked, if not overbanked — Belchertown, Ludlow, East Longmeadow, Longmeadow, Westfield, and others would fall in those categories — but there are still some opportunities to be had for new locations.

“Even within the city of Springfield I think there are places that might be underserved,” he said, adding that there are also some communities that, while they are heavily banked, may also yield opportunities for new locations. The bank currently has three offices in Springfield — the latest opened in Tower Square two years ago — and one each in Longmeadow, West Springfield, Agawam, and Wilbraham. Further expansion, said Burton, will be dictated simply by what makes sense for the bank.

“We do a lot of demographic studies on potential sites, and there are lot of things that come into play,” he said of the decision-making process when it comes to new branches. “We start by looking at the level of competition, but we also look at the populations in a given area; you don’t want just high-wealth or just low- to moderate- income. You need a good cross-section for a branch to work.”

Overall, Burton projects continued solid growth, in keeping with expectations for a bank of this size in a region that is seeing relatively little commercial and residential growth and is among the state’s most competitive banking markets.

“We’re not going to get to $1 billion in assets in five years; that’s not realistic given this market,” he said. “We just want to continue the momentum we’ve gained in recent years.”

The visit to Times Square, which took six months of phone calls with NASDAQ officials to schedule and coordinate, was just a small part of that momentum-continuing process, he explained, adding that he was persistent in his quest to gain closing-bell ceremonies as a way to officially mark the next chapter in the bank’s story while also generating even more enthusiasm within the bank.

“It’s something I considered very important, something I really wanted to do; it truly is a once-in-a-lifetime opportunity,” he said that Friday, adding that seeing the bank’s name in lights on the NASDAQ tower served to symbolically reinforce the motivation for taking the bank public — bringing the institution to a higher level within the community.

As for the bank’s stock, Burton says he monitors it, but is not obsessed with the minor fluctuations that have characterized activity since trading began. Taking some of Scott’s advice, he’s thinking long-term. “I don’t check it every 15 minutes; I don’t feel it necessary to do that. I know the quality is there, and I don’t have to worry about what it’s doing hour to hour.”

In Closing

There is no actual closing bell to ring at the NASDAQ. Like everything else about the 35-year-old market, this ceremony is technology-driven; the push of a button closes down trading electronically. Meanwhile, the final countdown, with its yelling and clapping, is broadcast live on the NASDAQ tower in the heart of Times Square, providing Burton, the others, and Hampden Bank more than 15 seconds of fame.

The proceedings are well-orchestrated, with the steps laid out in advance and considerable coaching about where to stand, where to look, and how loud to yell. After the ceremonies, the group moved to a well-marked spot across the street from the tower to get just the right angle for pictures.

There is no such script for what a community bank does after it goes public, however. Burton and others at Hampden Bank are still writing one. There will some new plot twists — and no one really knows the ending — but the overall story line will be the same for the foreseeable future.

“This is a new era for the bank,” said Burton, “but we’re going to continue doing things the way we’ve always done them — with the customer coming first.”

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