People”™s United Financial Inc. plans to enter the Boston market this year, and the Bridgeport-based bank”™s CEO reportedly identified California as a likely state for expansion ”“ possibly by taking a failed bank off the hands of the Federal Deposit Insurance Corp.
CEO Philip Sherringham told investment analysts that People”™s United plans to open a branch in Wellesley, Mass., a wealthy town just west of Boston. While People”™s United has close to 20 branches in Massachusetts, just one is east of Worcester ”“ in Westborough more than 30 miles outside Boston.
If People”™s United is planning an “organic” growth campaign to expand to Boston, a strategy also being pursued by Connecticut rival Webster Financial Corp., it also is strongly considering an outright acquisition in California, where Sherringham still maintains a home in the Brentwood neighborhood of Los Angeles since moving to Connecticut in 2003 to join People”™s United.
The company closed out 2009 by cutting a $738 million deal to acquire Financial Federal Corp., which finances leases on business equipment. Scheduled for completion on Feb. 19, the deal surprised some analysts after People”™s United spent most of the past few years hinting of plans to acquire a traditional, brick-and-mortar retail institution in the Northeast or Mid-Atlantic regions.
In a conference call with investment analysts in mid-January, Sherringham reiterated the bank is hunting for deals between Maine and Washington, D.C., but said it was open to deals in other locales where it could get financial assistance in any deals involving banks under FDIC stewardship. Sherringham said People”™s United has bid on two FDIC deals to date, without specifying whether those bids are active or whether the bank lost out to other bidders.
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Sherringham indicated he is not worried about the challenges of running a retail bank located in another part of the country, indicating it would be no more difficult than People”™s United”™s stewardship of bank branches in Bangor, Maine, it operates through Merrill Bank, one of six smaller retail banks it acquired in 2008 in its acquisition of Chittenden Corp.
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Obviously, Brentwood is a good deal more arduous a trip than Bangor, but deals being brokered by the FDIC may prove too attractive to pass up, opening access to an entirely new customer base.
“In every crisis there are winners and losers,” Sherringham told the L.A. Times last month, which reported as the possibility of People”™s United doing a deal there. “The bank sector overall is weakened, but there are a minority of winners ”“ like us, and like US Bank. We expect to do deals assisted by the FDIC ”¦and non-assisted deals. We”™re very active in terms of discussions with other institutions, but it is very competitive. Certainly we”™re looking in California.”
People”™s United cleared 2009 with $101 million in net income, including $24.9 million in the fourth quarter, which was down 26 percent from the same period in 2008.
Loans deemed in non-performance dropped by $7 million in the fourth quarter, which the company said reflects a stabilization in business conditions where it does business.
Sherringham told analysts in the conference call that the bank has seen increased activity in the commercial lending sector and that the bank has no plans to loosen up its credit standards to chase business.
“Things have been bubblier, shall we say, in Connecticut and New York,” Sherringham said. “Our underwriting criteria have been very stable over time, and that”™s put us in this great position. I think it”™s frankly a bit premature at this point, given what we see in the economy, to declare victory and loosen up dramatically. I just don’t think it’s reasonable. I also don”™t think it”™s necessary, because frankly we are getting a slew of opportunities in terms of loans ”“ very attractive pricing, very attractive credits. We don”™t particularly need to loosen underwriting to get more volume. I don”™t think it would be wise yet.”
