Amalgamated chief's goal after IPO: Create a nationwide bank
Amalgamated Bank in New York is the latest bank to become a public company.
While Amalgamated did not bring in any proceeds from the IPO — all shares were sold by investors — Keith Mestrich, the $4.2 billion-asset company's president and CEO, said the offering creates a more liquid stock that will help his team as it identifies expansion opportunities.
Amalgamated, which paid $59 million earlier this year for New Resource Bank in San Francisco, wants to pursue additional acquisitions.
Several other banks have held IPOs this year, including Spirit of Texas Bancshares, Origin Bancorp and Level One Bancorp. Eleven banks went public last year, according to data from FIG Partners.
More financial institutions are considering IPOs so they can access capital markets, said Jonathan Hightower, a lawyer at Bryan Cave Leighton Paisner. Having a liquid currency also makes a buyer more attractive to targets, and more banks view IPOs as a way to stay independent, he added.
“The general optimism about the operating and regulatory environments is causing more folks to say, ‘We may like to stick around for the long term,’ ” Hightower said. “Previously it was, ‘If we can get to a value we are comfortable with, we would be happy to hand it off to a bank with greater scale.’ ”
For Amalgamated, the long-term goal is to become a national bank, Mestrich said in a recent interview.
Here is an edited transcript of that discussion.
What are the benefits of going public?
KEITH MESTRICH: The opportunity to have a liquid currency really gives us an opportunity to think about our plan to have a national footprint that can be achieved largely through M&A. The flexibility we have with a liquid currency to construct deals to help us grow into the future is the single largest benefit we get. We also get ongoing access to capital markets as we continue on our growth trajectory — we now have the ability to access capital moving forward. The ability to think about recruiting higher-quality staff by being public and having the right mix of compensation tools that are available to us. And very importantly for our shareholders, the opportunity for them to gain a liquidity event from the very long investments they have had in the company.
Why is now the best timing?
It’s very interesting. This is an entirely secondary offering. The bank is not raising primary capital. The public markets have been very welcoming of IPOs and we think with the strength of our company’s balance sheet, the recovery that we have had and the recent performance bank stocks have had — we think it’s a good time to go and raise some capital.
Workers United was one of the investors selling shares. Will the union stay involved?
The union will continue to be the largest shareholder. They will own about 40% of the company going forward. The founders of the Amalgamated Clothing Workers established the mission for our bank in 1923 to provide banking services to unions and their members, and our expansion will include nonprofit organizations, advocacy groups and socially responsible businesses. The union being involved will just make sure that we keep that vision front and center.
Will it be more challenging to maintain your unique values as a public company?
Well if we [lose our values] than we’ve lost the greatest value proposition that adds real value for our shareholders. There are 5,000 banks and we're a little bit different than all the rest of them. The value-based culture that we have instilled is incredibly important to our customers. If anything, we will double down on those characteristics because they're what truly make us different from other banks and give us a competitive advantage in our customer set.
How is the New Resource acquisition going?
It’s going great. We closed the deal in May. We will fully integrate our systems and merge our brands in November, so we have a little time. The amount of talent within our bank — people that have done banking integrations — is far beyond what I knew, so the integration has gone really well. We're already seeing the synergies of the merger happen. Our deposit pipeline in San Francisco is robust. Our lending pipeline for doing direct C&I loans with mission-oriented for-profit and not-for-profit organizations is strong. It’s just a great merger and the benefits of it are coming to fruition very quickly.
What other markets are you eyeing for expansion?
We know our market story doesn’t play in every place across the country. So Louisville or Topeka are probably not the best markets, but places with a rich constituency of our target customer base — not just unions but nonprofit organizations and advocacy groups — are prime markets for us. Boston, Chicago, Los Angeles, Seattle, maybe Denver and maybe Austin. Those are interesting places where we'd like to grow. We have an enormous amount of organic growth in our existing markets, so we are not going to do seven transactions tomorrow, but over time we can have a nice national footprint.
Those are competitive markets. How will the bank distinguish itself beyond its values?
The biggest differentiator we have beyond our values is the quality of our bankers and the service we give to a group of organizations that generally feel underserved by traditional financial services. Our bankers know their target customer because they come from it — and it makes a huge difference. Our technology staff is rock solid and [can be scaled] to support a franchise that’s twice as large as what we have today. We have been smart in adding the right fintech and we haven’t gotten too far out in the respect of making the wrong bets on technology. There's a lot of money going on in fintech right now and I'm perfectly happy to have other people spend it. We will figure out how to be fast followers.
Will you continue New Resource’s partnership with P2Bi?
For a company like ours that has a deposit-first strategy, having alliances with people who can bring us very well-underwritten lending opportunities is something that's very good. A lot of the companies we'd like to lend money to are in that pre-profit stage. There's no way we could lend to them without the support of a company like P2Bi. We are looking to enhance that relationship and identify similar kinds of relationships that provide us with a pipeline of lending opportunities.
What has been the employee feedback for the IPO?
We offered our employees the opportunity to buy in through a direct-share program. We got amazing participation. I was in the office earlier this morning and there were a lot of high- fives. People recognize this is a seminal moment in the 95-year history of our company. We've turned a lot of corners in our history and today is another one. Now we have ongoing access to the resources that allow us to grow. We built a new team from the depths of our own financial crisis and people worked really hard to fix the bank that had some real problems. But nobody came to this bank with the vision that they were going to fix problems for 20 years. People are ready to be part of a growth story. I think it is a hugely exciting day for the people who work at Amalgamated.
Where do you see the company five years down the road?
I think we have a bold vision to become the financial partner for a constituency of socially responsible organizations. I think we will have a national footprint. In five years we hope we will be in those cities that I mentioned. I think we will add additional products, services and lines of business. I always hesitate to say how big we will be because I don’t really think that’s the right way to measure it. Are we providing value for our customers and are we in all the right markets with the right products, services and teams to do that?