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NHSB: Done Deal
Negotiations yield apparent peace treaty on bank conversion
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Business New Haven
2/2/2004
By: BNH
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Turns out that the opponents of New Haven Savings Bank's conversion from a mutual savings bank to a publicly owned stock company could be bought after all.
The price: $40 million.
That's the dollar value of the stock NHSB President Peyton R. Patterson announced January 26 would be earmarked for the bank's charitable foundation, more than quadrupling its assets to $49 million.
As a result of that investment and agreement on a host of other issues, local and state political leaders dropped their opposition to the bank's conversion on the same day that state Banking Commissioner John P. Burke announced that he would approve the bank's application.
NHSB last July announced its intention to convert from a depositor-owned mutual savings institution to a publicly traded stock company. Proceeds from the stock sale would in part be used to acquire the Savings Bank of Manchester and Tolland Bank in a deal worth slightly less than $800 million.
The announcement provoked a hailstorm of protest from depositors, politicians, even area clergy. Bank officers and directors were accused of engineering the deal to generate million-dollar-plus stock option windfalls. Burke scheduled public hearings in December and January on the bank's application, which drew an estimated 800 people, nearly unanimous in their opposition.
In late December negotiations began between the bank, City Hall and the banking commissioner's office to craft a compromise.
Then, early last month NHSB submitted a revised application to Burke for its merger and conversion. Among other things, it cut millions of dollars in insiders' stock options and other benefits.
Although no outcome short of killing the deal would have satisfied many critics of Patterson and other bank insiders, the negotiations gave sufficient succor to NHSB's most public critics to permit them to declare something like victory.
Of the $40 million infusion into the NHSB foundation, $25 million was earmarked for a newly formed foundation that would be governed independently of the bank by directors chosen by NHSB officials and local political leaders.
The new entity, which Mayor John DeStefano Jr. said could be converted into a community bank entity after three years, will focus on community development initiatives, including housing and urban revitalization.
Moreover, the bank's previously announced $27.5 million "NewAlliance for Neighborhoods" initiative will now include $6 million in loans to low- and moderate income borrowers at the below-market interest rate of 2.0 percent.
NHSB had drawn criticism previously for reluctance to lend to poor and minority borrowers in New Haven. During negotiations DeStefano asked for the $6 million fund to support New Haven's Livable Cities Initiative (LCI).
"The number of vacant structures in the city has dropped from 1,500 to 500 in five years," the mayor said. The new loan fund, he added, would help the city to address a growing housing shortage and eliminate blight.
"We have listened to the community throughout this process and it is my personal hope that the community will now see by our actions that we are still the 'very nice bank,' said Patterson.
The January 26 press event at NHSB's 195 Church Street headquarters was people by dozens of bank employees, many of whom were given green placards to hold with messages such as "NHSB LOVES NEW HAVEN!!!" Whether that is true will be borne out soon enough by the bank's actions. What is certain for now is that NHSB loves putting the most tumultuous chapter in its 175-year history behind it.
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