Pennsylvania's BT Financial Corp. hopes to pump up both its bottom line and stock price by reducing the size of its 62-branch network.
The $1.1 billion-asset BT should be trading at about $32 per share, or about 11 times earnings, instead of at its current $27.50 a share, said chairman and chief executive John H. Anderson. At that level, the stock would be trading in line with its peer group.
The stock has traded as high as $31.50 in the last year.
Company executives blame the lag in price and lack of investor interest on the company's lackluster earnings, high overhead, and an inaccurate image of western Pennsylvania as being dominated by sagging steel and coal industries.
BT reported 1994 net income of $10.9 million, with a return on assets of 1.01% and a return on equity of 12.10%. The company's efficiency ratio of 68% is "higher than it should be," partly because of the company's development from a series of community bank acquisitions, Mr. Anderson said, adding that BT wants a ratio of about 61%.
(Efficiency ratio measures expenses as a percentage of revenue.)
"They've brought down their expenses over the last few years," said Ross A. Demmerle, research analyst at Cleveland's McDonald & Co. "If they're able to continue to do so, that'll really help them out. Their stock price should certainly escalate ... at least as far as the (peer) group."
To cut costs, the Johnstown-based BT will probably shutter some of its three subsidiaries' branches, while converting others into automated teller machines and point of sale operations, company officials say. No specifics are available yet.
Officials said they do not plan to "close branches willy-nilly" to slash expenses, even though they admit to having an overbranched network, Mr. Anderson said.
"We think in the markets that we're in that that's pretty short- sighted," Mr. Anderson said, adding that random closures would drive customers away and cut from the bank's core income.
"We're in a lot of small towns, we're in a lot of ethnic, savings- oriented kinds of communities, where the branch is not only the center of social life, but it's also for us a very, very good source of low-cost core deposits."
The company will also change the hours of other locations and bring in trust advisers to branch sites whose customer base is dominated by senior citizens who prefer people to technology, Mr. Anderson said.