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WEEK OF MONDAY, SEPTEMBER 18, 2017
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A Publication of The Warren Group FLOOD INSURANCE REFORM
COMMERCIAL INTERESTS
ACQUISITION TALK
Roads And Rails Need Renewed Attention
National Flood Insurance Plan Comes Under Criticism
Major Transportation Overhaul Would Benefit All Of Massachusetts
Recent Hurricanes Highlight The Need For Change
BY SCOTT VAN VOORHIS BANKER & TRADESMAN COLUMNIST
BY JIM MORRISON BANKER & TRADESMAN STAFF
C
T
he National Flood Insurance Plan is drowning in debt that it may not be able to repay. Inaccurate flood maps, climate change and premiums that don’t accurate reflect risk levels are just a few of the barriers to solvency. The program is due to expire in December and while both advocates and critics say the program needs major changes, there is no consensus on what those changes should be. Created in 1968, the NFIP has historically teetered around financial stability. Some years it lost money and had to be bailed out with federal funds. Other years it made money and repaid its debts. The 2004-2005 hurricane season changed that.
“I am extremely optimistic about its future, because Congress understands that there needs to be a privatepublic partnership. I’m excited to see what’s going to happen in the next few years in the evolution of the NFIP.” — Joe Rossi, Rogers & Gray Insurance
Melrose, Pilgrim Bank May Soon Be On The Market Both Banks Overcapitalized, Have Activist Shareholders BY BRAM BERKOWITZ | BANKER & TRADESMAN STAFF
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even mutual banks and holding companies converted to stock companies between 2010 and 2014, often an indicator that they may be fishing for a buyer. Four of those seven will complete the state-mandated three-year waiting period following the completion of an initial public offering, and be eligible for acquisition this year. While two of those four – East Boston Savings Bank and Blue Hills Bank – already completed this waiting period in July and are not expected to be sold, the other two converts, Pilgrim Bank and Melrose Bank, will complete their waiting period next month.
Claims from hurricanes Katrina, Rita and Wilma overwhelmed the program, requiring it to borrow heavily from the Treasury. Then came Superstorm Sandy in 2012. Today the Federal Emergency Management Agency, which administers the NFIP, owes the Treasury nearly $25 billion (before Hurricanes Harvey and Irma), a debt many say it cannot repay. FEMA has struggled to keep up with interest payments; it only collects about $3.5 billion in premiums annually. But that’s exactly how it was designed to work, according to Larry Larson, director emeritus and senior policy advisor to Continued on Page 8
These two smaller institutions, according to bank lawyers and consultants, are likely to draw interest from the bigger institutions looking to make an acquisition among a small pool of contenders in Massachusetts. “The smaller banks are much more likely to be candidates for acquisition,” William Kozak, founder, president and CEO of WTK Associates, told Banker & Tradesman. “Mostly because of the way everything is structured today – the regulatory environment, the general competitive environment, the general cost of doing business and securing high quality management and staff – it is very difficult for a small bank to satisfy these issues or make acquisitions themselves.”
Approximately 60 to 80 percent of banks that undergo a standard conversion to stock form of ownership eventually are acquired, according to Arthur Loomis, president of Loomis & Co., a New Yorkbased investment bank that has worked with community banks in Massachusetts on stock conversions and mergers and acquisitions.
CONTENTS
In Person................................................................. 7
Commercial & Industrial....................................... 10
Points...................................................................... 4
Residential ............................................................. 8
Classified Sections................................................ 22
By The Numbers...................................................... 6
Banking & Lending.................................................. 9
Records Section.....................................................B1
Acquisition Indicators Loomis looks for three main factors when trying to determine whether a bank is likely to be acquired: the age of a bank’s executive team and board of directors; the perforContinued on Page 9
entral and Western Massachusetts have struggled for years to break free of the long shadow cast by Greater Boston, the economic engine of New England and one of the wealthiest urban hubs on the planet. It’s certainly not for a lack of trying. The region has plenty of cheerleaders in chambers of commerce and state economic development officials touting the merits of Central and Western Massachusetts to companies looking for a new home. “Central & Western are going to need a few more victories to build up the momentum SCOTT VAN VOORHIS before one of the big corporates say yes,” Jay Ash, the state’s economic development chief, noted in an email to a Springfield pol, according to MassLive. “But it never hurts to ask and advocate, so I will continue to do so.” All cheerleading aside, the situation seems to be getting worse, with the GE headquarters deal and now word of Amazon’s strong interest in the Hub further increasing the disparity between the Boston area and everyone else in Massachusetts. So it’s time for all the boosters trying to sell corporate America on the virtues of the Pioneer Valley and the potential of sundry and assorted old mill towns to face up a harsh but necessary reality: GE isn’t walking through that Continued on Page 3
CREDIT UNION
LEADERSHIP, INTEGRITY,
SEPT. 2017
COMMITMENT
LEADERSHIP, INTEGRITY, COMMITMENT
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