If capital is king these days, then Peyton Patterson, the chairman and chief executive at NewAlliance Bank, should be wearing a crown.
NewAlliance's off-the-charts capital levels have helped the New Haven, Conn., thrift get through the financial crisis far better than most financial institutions and given Patterson options that many other bankers can only dream about.
Business expansion? Patterson says NewAlliance wants to move into new lines of business, such as leasing and asset-based lending, by lifting out teams of bankers from weaker institutions. Acquisitions? Under Patterson, NewAlliance has bought four banks, a trust company and an asset management firm, and still has enough in its war chest to make several more acquisitions, both inside and outside of its markets.
"We call it our Amtrak theory," Patterson says of the bank's acquisition strategy. If a target is "in a market that's high priority and you can get there by Amtrak, then it's a market we should be looking at."
Patterson's story, by now, is a familiar one. She joined what was then New Haven Savings Bank in early 2002 after its longtime CEO passed away, and a year later, shook up Connecticut's banking scene with her bold plan to take the sleepy thrift public and simultaneously acquire two other financial institutions. Today, the $8.6 billion-asset NewAlliance is the third-largest deposit institution based in New England, and Patterson, who had previously spent most of her professional career in New York, is one of Connecticut's most respected business leaders.
The $1 billion NewAlliance raised in its initial public offering was, at the time, the most ever for a converting thrift, and for years, it was under intense pressure to put that money to work by pursuing larger acquisitions and ramping up its lending.
"If we had listened to every investment banker or analyst that came through here when we first went public, I would have no capital," Patterson says.
At June 30, NewAlliance's total risk-based capital ratio stood at 20.58 percent, more than twice the level at which banks and thrifts are considered to be well capitalized.
Of course, there's a downside to having such high capital levels. NewAlliance's returns on assets and equity are solid, especially when compared with other thrifts, but hardly eye-popping. Still, in this climate, a strong capital position can be a bank's best asset. Look at deposit growth. Deposits at June 30 were up more than 12 percent from the same period a year earlier, a jump Patterson attributes to "a flight to quality."
Yes, convenience matters, but Patterson says that recent research by NewAlliance found that many customers now consider safety and soundness and whether a bank took TARP money (NewAlliance didn't) before deciding where to park their cash. The capital cushion has also helped NewAlliance maintain a five-star rating from BauerFinancial for an impressive 62 straight quarters. Only 9 percent of the nation's banks and thrifts can claim such a run of consistency.
Though NewAlliance has largely sat tight through the financial crisis, Patterson appears ready to do something big. She says opportunities for acquisitions are "accelerating" and that she is eyeing both FDIC-assisted and traditional deals.
Perhaps with expansion in mind, she created the position of chief marketing office earlier this year and brought in former BBVA Compass executive Mark Gibson to fill the role. She also hired longtime SunTrust executive Gene Kirby to oversee, and help expand, NewAlliance's four primary lines of business.
"We want to replicate what we're doing in [existing] markets in a bigger venue," Patterson says. "I believe I've got the team, the board and the confidence of investors to do this."