Small Banks in Southern New Hampshire Taking BayBanks' Invasion Plans

Boston's BayBank Inc. is on the acquisition march in southern New Hampshire, but community bankers are ready to do battle.

"Anytime you have somebody as good as BayBanks, sure it's going to create a challenge," said Christopher J. Flynn, president and chief executive of $310 million-asset Peterborough Savings Bank. "It doesn't really bother us. We just know that we have to continue to get better."

BayBanks is buying $143 million-asset Cornerstone Financial Corp. of Derry for about $18.5 million in cash. That's almost 2.2 times Cornerstone's book value of $4.04 per share and about 10 times the company's 1994 earnings of $1.9 million.

The deal is $10.8 billion-asset BayBanks' second in New Hampshire since leaping onto the acquisition stage in December with its purchase of $614 million-asset NFS Financial Corp., Nashua. Both deals are expected to close in the third quarter of 1995.

The two deals will provide BayBanks with its first foothold in southern New Hampshire, which bank officials consider part of BayBanks' natural market.

The combined 21-branch network of NFS and Cornerstone serves more than 100,000 households in southern New Hampshire and will "fill in a missing link" in the BayBanks franchise, said William M. Crozier Jr., chairman and chief executive of BayBanks.

Still, the activity by BayBanks has surprised many observers. Prior to the December NFS announcement, BayBanks hadn't acquired an institution in more than 20 years, focusing its attention instead on building its retail branch network in the Boston area.

"BayBanks has been so quiet in this period of mergers and acquisitions that it surprises me that suddenly in 1995 they're becoming very active," said James Moynihan, senior vice president of Advest Group in Boston.

Also, NFS and Cornerstone have always been tough rivals for other community bankers, so the added competition will be nothing new, said Paul R. Shea, senior executive vice president of Bank of New Hampshire Corp.

Charles W. Smith, chairman, president, and chief executive of $312 million-asset Granite State Bankshares, welcomed the addition of BayBanks to the market.

"Bigger's not always better," he said. "We have not found it to be a disadvantage competing with the larger institutions in our local communities."

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