A New York state-chartered thrift is converting to a commercial bank in an effort to gain access to the state's $10 billion public deposits market.
The move by $1.1 billion-asset Binghamton Savings Bank is designed to resolve a nagging problem for the thrift, which hasn't been able to attract enough deposits in some of its outer markets despite success in lending there.
Binghamton Savings had a 93% loan-to-deposit ratio at the end of 1994.
New York law bars thrifts from accepting public funds, keeping institutions like Binghamton Savings out of a market totaling $10 billion to $12 billion, observers estimated.
The charter change is to allow Binghamton, which will be renamed BSB Bank and Trust, to take deposits from local governments and school districts in its four-county market area in south-central New York state.
Public funds in that area totaled $345 million in June 1993, said Binghamton Savings spokesman Matt Woolson.
The thrift would compete for the funds with local, regional, and even money-center banks, such as Chase Manhattan Corp. and Chemical Bank Corp. of New York City. Buffalo-based Marine Midland Banks Inc. is also a competitor for these funds.
"Municipal deposits are a petty big deal," said First Albany Corp. bank analyst Kevin Timmons, adding that they usually comprise 4% to 8% of total deposits in upstate New York markets. "That's a pretty big chunk of change that BSB couldn't do before, but they can now."
In its home market of Broome County alone, Binghamton Savings controls about 29% of the nongovernment deposit market. Mr. Timmons said he expects the bank to get a comparable share of public deposits, especially since, as a thrift, it already offers all the other banking services a municipality would need.
New York is one of the only states that prohibit thrifts from accepting public deposits.
Last year, the state's thrifts fought for and won the right to participate in a special state program that offers banks cheap funds to make below-market-rate loans to small businesses. The program had been limited to banks because its funding was initially considered public deposits.
Officials hope to complete the conversion by Aug. 1.
The charter change will make official what is already true in fact, bank executives believe. The thrift had converted in all but name during the last 10 years and is now the largest commercial lender in Broome County, said Mr. Woolson, the spokesman.
Commercial loans comprise the largest portion of its portfolio, at $403 million, or 45% of all loans, as of March 31.
"We found it somewhat awkward to be portrayed with thrift institutions, and we seldom received recognition for the fact that we were for all intents and purposes a commercial bank," said William H. Rincker, president and chief executive.
Mr. Rincker also said officials want Binghamton Savings employees to start cross-selling traditional thrift products with commercial services.
The thrift has traveled a rocky road to its charter flip. The application was first submitted to the Federal Deposit Insurance Corp. in July 1994, but it was opposed by a local community group, the CRA Coalition.
The coalition protested the application based on 1992 Home Mortgage Disclosure Act data that showed the thrift had approved only two of six loan applications from minority group members.
Binghamton Savings eventually agreed to work with the coalition to develop and promote loan products and outreach programs for low- and moderate-income groups.
