In acquiring Lowell, Mass.-based Butler Bank, People’s United Bank has taken a major step in what it acknowledges is its relentless march from its Bridgeport home to the Boston metro market.
Federal regulators stepped in April 16 and ordered the closing of under-capitalized Butler and its four locations — one each in Lowell and Andover; two in Marlborough.
Butler’s woes were well-known in banking circles. The bank had bet big on the construction industry during its peak, and suffered the consequences when the real estate bubble burst. Butler becomes the first bank failure in the Bay State since 1994.
People’s United was the winner among five bidders for Butler’s assets, including $233 million in deposits. However, it has a loss sharing agreement with FDIC, where the FDIC will assume 80 percent of the losses and People’s United will assume just 20 percent.
The transition was seamless for customers — Butler’s branches were shut down on a Friday at 6:05 p.m. and reopened the next day with the same staff under the People’s United name.
“It’s really business as usual,” said Timothy Crimmins, president for People’s United’s Massachusetts banks — Flagship, the Bank of Western Massachusetts and now Butler. “All the employees are still in place, and I think the customers were very reassured to see the familiar faces.”
While the failure is viewed by many in the industry as an anomaly, the arrival of People’s United promises to change the dynamic in the local and state banking industry in a big way.
“It remains to be seen how aggressive People’s United will become in this marketplace,” said Rick Bennett, president and CEO of Marlborough Savings, which is located across the street from one of newly acquired People’s United locations. “I think we’ll probably see a lot of marketing and advertising dollars spent.”
And while the People’s United name has taken second fiddle to the Flagship Bank name in Central Massachusetts, it’s not likely to stay that way for long. People’s United has said it plans to gradually transition the Flagship name out of use.
People’s United — with $20.6 billion in assets and 300 branches — has a reputation as a deep-pocketed institution with a relatively conservative risk profile, according to Damon Delmonte, an analyst with Keefe, Bruyette & Woods who tracks People’s United.
“By charter, they’re considered a thrift, but their business mix closely resembles a commercial bank,” Delmonte said. “Their level of asset quality is very strong and they have conservative underwriting practices. I don’t see them as big risk takers.”
