🔒Amid perpetual M&A activity, one CT bank CEO pledges ‘we will absolutely not be acquired’

Mergers and acquisitions have reshaped Connecticut’s banking landscape in recent years, erasing well-known and established brands from the community-lending scene.

It’s also provided opportunities for other local banks like Middletown-based Liberty Bank, which has steadily grown its deposit market share, becoming the third largest Connecticut-headquartered bank, and 10th largest among all lenders doing business here.

But if you’re wondering whether the mutual lender could be the next acquisition target, think again, says Liberty Bank President and CEO David Glidden.

Few chief executives make guarantees about their bank remaining independent, especially in this era of perpetual M&A activity, but Glidden, who is only eight months into his job, is unequivocal.

“Liberty Bank is absolutely more likely to be an acquirer and we will absolutely not be acquired,” the longtime New England bank executive said in a recent interview at Liberty’s leafy Middletown headquarters.

There are a few reasons for that.

For a mutual bank, which is owned by its depositors, to be acquired by a non-mutual lender, it first must make an initial public offering and then wait three years. It’s easier for a mutual to buy a fellow mutual, but Liberty’s size is unrivaled in Connecticut (and most of the country), which means there are few legitimate mutual suitors.

Either way, strike the thought, says Glidden.

“Myself and our board are 100 percent committed to mutuality,” he said.

Liberty Bank has been an acquirer in its own right this past decade, which has helped it just about double in size, to nearly $6 billion in assets, as of the October closing of its $71-million purchase of Simsbury Bank & Trust.

That five-branch deal followed acquisitions of Naugatuck Valley Savings and Loan’s nine branches in 2016; Bank of Southern Connecticut’s four branches in 2013; and Connecticut River Community Bank’s three locations in 2010.

Glidden, 57, who spent the past 24 years at TD Bank, said he’s aiming to keep Liberty on its growth path.

That could mean more acquisitions — as long as they make sense and fit in with Liberty’s overall strategy. Or, the bank can stand pat for awhile and grow organically, which also poses significant opportunity, Glidden said.

As a well-capitalized and profitable mutual bank, Liberty doesn’t have the same quarterly earnings pressures that its public competitors do.

It allows for a longer-term strategy, and investing earnings back into technology, talent and other initiatives, rather than dividends.

“The nice thing is I’m willing to look at anything, but I don’t have to do anything,” he said. “We can be a little more patient and long term.”

Mark Fitzgibbon, a banking equity analyst with Sandler O’Neill who covers several publicly traded Connecticut banks, said lenders across the country are feeling pressure from low interest rates and the need to invest in cybersecurity, technology and regulatory compliance.

Those pressures exist for Liberty, too, but its balance sheet and mutual charter give it a different outlook than big public banks.

“They can take their time doing acquisitions, they can spend a longer period integrating them,” Fitzgibbon said.

There’s a downside to keeping more capital on hand, which mutuals often do by necessity, since they can’t raise outside capital without doing an IPO or forming a holding company.

“It depresses their return on equity,” Fitzgibbon said.

Liberty doesn’t appear too concerned. It’s booked steady profits over the past decade, hitting a net-income high of nearly $72 million in 2018, according to its financial statements.

Leveraging a unique position

As he looks ahead to 2020, Glidden plans to leverage what he sees as a unique position in the Connecticut market.

Liberty is the oldest mutual bank in the state, which allows it to cater to a hometown customer base. But it also has a lot of financial firepower to compete in the acquisition game and box with larger rivals on commercial lending and other offerings.

Glidden calls it “out-localing national banks and out-nationaling local banks.”

“We can do most things a very large money-center bank can do and we can do some things from size and scale that smaller banks might have a problem doing,” he said. “But we can distribute that in a local fashion as a community bank, which I think still resonates with people.”

It’s that mix of factors that convinced him to part ways with TD Bank, where he had most recently been regional president for northern New England and upstate New York.

Glidden said an executive recruiter called him about a job offer, and he listened, preparing to give a polite “thanks but no thanks” when the spiel was over. When he heard it was Liberty Bank, he changed his mind.

“It was probably the only call I would have answered in New England,” he said.

Moving forward, Glidden said he aims to grow Liberty’s small business loan portfolio and capitalize on the bank’s newly acquired presence in Hartford County.

“We intend to continue to grow organically in Greater Hartford and in all of our market areas,” he said.

He’s also focused on Liberty’s commercial-industrial lending within and outside Connecticut.

That includes one of Liberty’s longtime niches — timeshare and resort financing, which it has built into an approximately $700-million portfolio in Florida, Colorado, Massachusetts and other states.

“It’s a very profitable business,” Glidden said.

Redlining settlement

While it was Liberty’s strong brand and unique identity that drew the Springfield-born Glidden to Middletown, his arrival came on the heels of a lawsuit that threatened to mar Liberty’s reputation.

The 2018 legal action by the Hartford-based Connecticut Fair Housing Center and the National Law Center accused Liberty of violating federal “redlining” laws by allegedly denying loans at higher rates, or not providing adequate mortgage lending-services to consumers living in African-American or Latino neighborhoods.

Under the leadership of retiring CEO Chandler Howard, Liberty settled the suit earlier this year, just before announcing Glidden’s hire. It pledged to open a Hartford loan office, host financial literacy seminars and invest an additional $15 million in loans and grants to borrowers and nonprofits in low-income areas.

Glidden said Liberty, which has an “outstanding” rating under the Community Reinvestment Act and never admitted wrongdoing, is currently on pace to exceed many of those financial commitments.

He said Howard was correct not to drag out costly litigation.

“Why don’t we not spend millions of dollars on lawyers, and ... instead put those dollars into a pot and accomplish what we both want?” he said. “The end result is a positive for those communities.”