BankAmerica, Bank of Boston, Shawmut Eye Connecticut Banks
BankAmerica Corp., Shawmut National Corp., and Bank of Boston Corp. are among the companies eyeing a federally assisted acquisition of two insolvent Connecticut banks, according to a regulatory source.
The institutions on the block, Citytrust Bancorp and Mechanics and Farmers Savings Bank, are said to be attracting considerable interest because of their desirable location just north of New York City. The Bridgeport-based banks have a combined $3.25 billion in assets.
Since the Federal Deposit Insurance Corp. kicked off the bidding process two weeks ago, the following companies have also surfaced as potential bidders: Chase Manhattan Corp., Bank of New York Corp., Republic New York Corp., Chemical Banking Corp., and Banc One Corp.
No foreign bank has expressed interest, said the regulatory source, who added that bids are due July 23.
A list of companies that have looked at the books of the insolvent banks was unavailable, but Chemical and Republic have been inside Citytrust, sources close to the talks said previously.
Representatives of all the banks named as prospective bidders were unavailable or declined to comment on their intentions.
"Citytrust is likely to be a very sweet deal for the acquiring bank," said Gerard Cassidy, an analyst for Tucker, Anthony in Portland, Maine. "They're going to get it at a bargain-basement price."
The FDIC is attempting to link the sale of the two Bridgeport banks, but it is not requiring combined bids, according to sources close to the bidding process.
A buyer could pick up both Citytrust and Mechanics for $15 million to $30 million, Mr. Cassidy suggested.
Analysts estimate the government will have to ante up at least $100 million to make the two banks solvent. As of March 31, Citytrust had $2.05 billion in assets and negative equity of $89 million, meaning liabilities exceeded assets by that amount. Mechanics and Farmers had $1.2 billion in assets and negative equity of $89 million. Both companies have suffered heavily from losses on real estate loans.
Citytrust had $428 million in nonperforming assets as of March 31, representing 27% of total loans plus foreclosed real estate. Any deal to acquire the good assets and deposits of the company would undoubtedly require the FDIC to take back the bad assets.
Entry for BankAmerica?
San Francisco-based BankAmerica declined to comment on any interest in Citytrust or the Connecticut market.
"I can't imagine that BankAmerica would come into New England just for Citytrust," said Donald Kauth, an analyst for First Albany in Albany, N.Y. If interested, BankAmerica considers Citytrust a stepping stone to other New England acquisitions, he suggested.
An official of Hartford-based Shawmut, which is the largest institution in Connecticut, declined to comment on the possibility of a bid for Citytrust. He said the FDIC has made it clear, however, that Shawmut is a qualified bidder for small and midsize institutions in New England. Regulators have even visited the company to encourage it to bid in federally assisted deals, the official said.
That expression of regulatory confidence "would be a positive sign" for Shawmut, said Thomas Brown, an analyst for Donaldson, Lufkin, and Jenrette in New York.
Shawmut's nonperforming loans have risen sharply, but it has an adequate capital buffer. Shareholders' equity equaled 4.71% of assets at the end of the first quarter.
Connecticut National Bank, a Shawmut unit, has eight branches in Bridgeport. By acquiring Citytrust, the bank could close overlapping offices and cut costs.
A Bank of Boston officer, who declined to comment on Citytrust, said last week that the company is interested in smaller to midsize acquisitions "at the right price" in New Hampshire and in Connecticut.
Bank of Boston indicated its enthusiasm for in-market acquisitions in an announcement Thursday that it would omit its 10-cents-a-share dividend in the second quarter. "This step also better positions us to take advantage of selective in-market acquisition possibilities currently available in New England," chairman Ira Stepanian, said in a prepared statement.