The fight to become the super regional bank of the Northeast took a major turn last week when NewAlliance Bank agreed to sell itself to New York-based First Niagara Financial, moving a relatively unknown company in this state toward the top of the food chain.
So the question now is how will Connecticut’s other regional powerhouses — Bridgeport-based People’s United Bank and Waterbury-based Webster Bank — respond?
Analysts say the two banks aren’t likely to go on an acquisition spree to match First Niagara’s larger size (nearly $30 billion in assets), although People’s United will likely continue its hunt for deals.
But more importantly, the competition between the banks will now ratchet up. And Webster and People’s are likely going to attempt to gain the edge by touting their local appeal.
“Deals like this create an opportunity for local banks to try to capitalize on an out-of-state bank coming into the market,” said Damon DelMonte, an analyst for Keefe Bruyette & Woods in Hartford. “Webster and People’s will be able to identify themselves as home-grown, local banks. First Niagara is going to be that larger out-of-state bank coming into Connecticut.”
The merger of New Haven-based NewAlliance Bancshares, parent to NewAlliance Bank, into First Niagara will create a banking behemoth with more than $29 billion in assets. It also means the NewAlliance’s orange and blue brand will disappear in the state.
As part of the deal, NewAlliance’s 88 branches, including one recently opened in downtown Hartford, are expected to be converted and rebranded as First Niagara locations.
That means an unknown name will have to fight for customer loyalty.
At the same time, People’s United and Webster Bank have been fighting for the title of “New England’s” bank for years, with each lender countering each other’s moves to try to protect that position. Last year, for example, Webster Bank opened a flagship office in Boston. Just last month, People’s Bank said it would enter the Boston market with two branch openings there this year.
Locally-based financial institutions have the advantage because they can tout that their service representatives and bankers are based in the state, and actually know personally borrowers and depositors.
“That approach has worked in the past,” DelMonte said. “From the consumer’s point of view, the concept of a big bank is that you just become a number and not a name anymore.”
Southern CT Bancorp Improves
Southern Connecticut Bancorp reported a slight profit in the second quarter, reversing significant losses suffered during the same time period last year.
The parent company to New Haven-based The Bank of Southern Connecticut said its net income for the quarter ended June 30, was $17,000, or 1 cent per share, compared to a net loss of $257,000, or 10 cents per share in the year ago period.
During the second quarter, the company’s earnings took an $87,000 hit for costs related to its merger with Naugatuck Valley Financial Corp.
The improved earnings were helped by a nearly 50 percent increase in the bank’s interest income, or the money it receives on interest-bearing assets. The bank saw its interest income jump to $1.4 million, compared to $927,250 a year ago.
Interest fees on loans increased about $400,000 alone, bringing in a total of $1.9 million.
As of June 30, the company had $160.1 million in total assets, $124.6 million in gross loans, and $140.3 million in total deposits.
Mortgages Online
Farmington Bank has launched a new online mortgage application that will allow consumers to apply for a home loan online 24 hours a day, seven days a week.
The online application takes about 20 minutes to fill out and allows customers to enter their information, find out which loan products best suit their needs and submit an application, the bank said.
The new service is part of Farmington Bank’s efforts to build on its online offerings.
“Giving customers the ability to apply for mortgages online is part of Farmington Bank’s strategy to offer state-of-the-art products and services to meet customers’ ever-changing needs,” said John J. Patrick Jr., chairman, president and CEO of Farmington Bank.
In addition to applying for a mortgage online, customers have the opportunity to explore loan options, view current rates and make an appointment with a loan specialist. New features include educational tools, calculators, and a glossary of lending terms and detailed expectations of the application process.
Greg Bordonaro writes the Financial Sense column every other week. Reach him at gbordonaro@HartfordBusiness.com.
