“We get talent and scale from mergers,” said health care CEO Angela Braly.
And Roger Altman, former American investment banker, said, “Mergers generate substantial synergies.”
Both business leaders could be speaking about the merger of Camp Hill, PA–based Atlantic Community Bankers Bank (ACBB) and Glastonbury, CT-based Bankers Bank Northeast (BBN). Both entities brought different strengths to the negotiating table, and are destined to emerge even stronger and more service-oriented as the former competitors join forces.
When Jon Evans, President and CEO of ACBB, announced the merger of ACBB with BBN, he stressed operational efficiencies and the opportunity to increase value, cut costs, and expand services to hundreds of customer banks.
On October 19th, BBN shareholders formally approved the merger, which is a stock-stock transaction with ACBB paying a slight premium above book value. The merger is tentatively scheduled to close by year’s end.
When the transaction is finalized, the combined resources will result in an $800 million asset bankers’ bank, operating in 11 states throughout the Mid-Atlantic States and New England. Four BBN Board members will join ACBB’s Board of Directors.
The new ACBB will operate from three locations. The office in Camp Hill, which Evans describes as a “nondescript three-story building,” on Market Street, will remain the corporate headquarters for ACBB. Glastonbury, Connecticut will become a regional office with relationship management, business and product development responsibilities as well as operational capabilities. A forward-thinking company launched by ACBB, BITS, will continue to operate in Newark, New Jersey, where it provides technology and communication services to more than 100 community financial institutions.
ACBB’s 42 employees will join with BBN’s 18 to reach a sum of 60 strong. BITS also employs 35 workers in Newark.
The combined executive management team of ACBB will be:
• Jon Evans – President & Chief Executive Officer
• Craig Howie – Senior Executive Vice President
• Laura Gibboney – Chief Operating Officer
• William Sayre – Chief Credit Officer
• Amy Braun – Chief Financial Officer
• Brian Good – Chief Sales Officer
• John Davey – Chief Business Development Officer
• Jerry Murphy – Chief Executive Officer BITS
• Regina Malloy – Chief Risk Officer
“The Executive Management Team will provide us the talent and vision to grow your bankers’ bank into the future with a mission of helping you compete more effectively,” Evans wrote in an online letter to shareholders and customers in November. “While we remain committed to the traditional correspondent services, we will also focus on meeting the future needs of community financial institutions.”
Because of the scale of the merged companies, the newly united bank will have a greater aggregation ability and an enhanced ability to negotiate better pricing through added volume.
“This will become even more important in a faster payments world,” Evans explained.
A significant portion of savings generated by the merger will be used to support product development efforts, thus benefiting every customer in the long run.
“Our focus is on technology solutions that leverage opportunities in the FinTech world and keep pace with the ‘faster payments’ trend,” Evans wrote.
Two new services will be available immediately upon closing: 1) Advisory services and 2) the Bankers Bank Network loan portal, also referred to as BBN.bank. Advisory services provide credit management, strategic planning, process improvement and expert witness services.
Credit services include the following:
• Loan Review
• Outsourced Annual Reviews
• ALLL Analysis & Validation
• Credit Training
• Loan Acquisition/Sales Due Diligence
• Loan Workouts
The Bankers Bank Network loan portal was just rolled out by BBN. Designed to be a low-cost alternative for selling and buying commercial and residential loans, the portal will include loans of a variety of asset classes allowing customer-banks to manage their balance sheet more efficiently and diversify their loan portfolios. In a highly secure environment, banks will be able to create their own private trading network and restrict their competitors from viewing loans they have posted for sale.
Information on these products will be available on the website, acbb.com, soon after the merger is finalized.
The merged bank will operate two separate systems until April 2018, when vendors can fully accommodate the consolidation of operations.
For BBN client banks who use Excess Balance Account services, Reserve Requirement Pass-Through arrangements, and settlement of FRB Discount Window borrowings through their BBN account, they must update their Federal Reserve Bank paperwork to reflect the change to utilizing ACBB’s FRB accounts for these services. Settlement of all other FRB services will remain the same at this time. BBN’s client services team will be reaching out to those banks affected with new paperwork and instructions.
A Look Back
The merger is a red-letter day in ACBB’s 34 years of life, and BBN’s record of service.
ACBB started in 1983 as Pennsylvania Independent Bank. In 1992, the venture was renamed Atlantic Central Bankers Bank.
Their footprint expanded into New England about six years ago.
In 2013, the bank changed the “C” in their name from “Central” to “Community” to better reflect their service focus. The bank also formed a holding company in 2016, which provides many advantages for mergers and non-bank entities.
The merger made sense to both Evans and Craig Howie, CEO of BBN, as they both saw the landscape changing in this post-financial meltdown environment.
Evans identified two main drivers: the industry is in a consolidating environment with more banks merging, and no new banks are being born. The wave of de novo banks has come to a halt.
“A flattened yield curve and new regulations deflate the number of new banks,” Evans said.
Evans has lived in central Pennsylvania since 1999. Originally from the San Diego area, he grew up in New Jersey. His father worked at the Philadelphia Naval Ship Yard. Earlier in his career, he ran a regional correspondent line of business in New Jersey.
Former PACB and ACBB leader Frank Kaminski, Jr. found Evans and tapped him as his successor before he retired. Evans has been leading ACBB since 2001.
Linking Camp Hill to Connecticut is not too far a stretch, Evans said. Many Pennsylvania community bank directors had needs in New England, for winter homes in Vermont, business expansion and more, drawing them up organically into the New England market.
After ACBB and BBN competed against each other for a few years, Evans and Howie sat down in February 2016 and noted that they each offer products and services that the other did not. Instead of competing, they decided to collaborate, in order to offer a greater variety of services.
Like banking trade associations, they provide services with an aggregation model. The new marriage can allow them to offer better deals through volume.
BBN already offers a loan review service. ACBB has a compliance arm and a tech company called BITS, a telecommunications company, which is a big plus for its member banks.
An acronym for “Banking Infrastructure Technology Services,” BITS provides services for over 100 banks in 17 states, Evans said.
The Merger in Pennsylvania
So what does a merger mean for Pennsylvania’s community banks?
“It’s all positive for them,” Evans said. “We are stronger in numbers and offer more services.”
“There are so many talented people at BBN who will make our organization stronger,” he added.
As far as current offerings, none of that will change, Evans reassured member-banks.
ACBB will partner with the fintech company on different products, with more online payment solutions, to help community banks compete in a paperless future.
With a stronger lending division, added capital will help provide more lending capability.
Integrating customers, systems and employees is no small undertaking, Evans acknowledged.
They are doing so with planning and patience.
Evans knows the Pennsylvania banking market well. The Commonwealth has a few more rural banks than other states, which makes Pennsylvania unique, and its needs more specialized. It is tougher to deploy capital in the form of loans and get deposits, with so many rural banks here.
But “Pennsylvania banks are pretty strong,” Evans said. “They’ve been through tough times and they’ve managed it well. We are fortunate to be in a strong and healthy state.”
He predicted that he will put 45,000 miles on his car this year as he visits customers, who he fondly describes as “salt of the earth” people.
Pennsylvania’s political and regulatory universe is less hospitable. Evans admitted that the state’s budget process has been “frustrating” for banks and the often-ugly politics clouding and clogging progress.
“More consensus is needed at the state and federal level,” Evans said.
Evans applauded PACB for its professional advocacy and advice in today’s divisive political climate.
He said that lightning rod Dodd-Frank law didn’t drive the ACBB merger directly, but it surely didn’t help, he said. Dodd-Frank was “confusing and onerous for a lot of us banks,” he said, and he joins his fellow community bankers in eagerly waiting for tweaks to come.
“Community banks are tarnished with the behavior of the larger banks, but I see a lot of community banks who are committed to their communities—and are serving their community well, and that often gets overlooked.”
“When a large bank acquires a small bank, you just don’t see that same commitment to community,” he said, in terms of service projects, charitable contributions, and other measures of community devotion.
Howie understands Pennsylvania’s history and market also. Howie came to BBN in July 2013, after working for years with many community banks in his post with the Federal Home Loan Bank of Pittsburgh.
He described BBN as a “smaller banker’s bank,” which is challenging to operate in a low-interest rate environment.
In a fortuitous twist of fate, Evans was one of Howie’s customers at FHLB. They began talking about what benefits a merger would generate for customers in the Northeast and mid-Atlantic state.
BBN offers a marvelous high-tech solution to buy and sell loans, along with advisory services, loan review and credit underwriting.
Howie is a Pennsylvanian at heart. He grew up in Montgomery County, graduated from Susquehanna University in Selingsgrove, and earned his master’s degree at Drexel University.
Now based in Glastonbury, CT, he said the merger “will mean more solutions, different solutions and different products to help them remain competitive with larger banks.”
BITS is unique for a banker’s bank, he said.
Another plus for customers is the Compliance Anchor service. Through a monthly subscription, bankers can obtain better training and education in the intricacies and evolutions of the compliance world.
“We are so busy, it’s hard to learn all there is to know about compliance,” Howie said. Changes are often fast and furious. The bank offers a collaborative forum, so bankers can obtain feedback on effective ways to do things. “It’s a unique service that our customers enjoy,” Howie said.
From his experience in the Keystone State and in Connecticut, Howie sees far more similarities than differences in the two banks and the two markets.
“Community banks are the same. We have the same problems and provide the same benefits and services.”
And within that trusted service and the marriage of two bankers’ banks, he sees power.
“Community banks are the lifeblood of all the communities I go through,” Howie said. “If a community has a strong community bank, it will thrive. It’s our goal to make you as successful as possible so your community can be as successful as possible.”