Getting a big-name banker to join a board can be a coup for smaller institutions. It's also hard to pull off, but Berkshire Hills Bancorp recently showed it can be done.
The $6 billion-asset company announced last week that William Ryan, former chairman and chief executive at TD Banknorth, would become its chairman. Industry observers quickly praised the addition, noting that Ryan could help the Pittsfield, Mass., company with acquisitions and recruiting talent.
In general, high-profile appointments at community bank boards can boost investor confidence and bring positive publicity, industry observers say.
"Management teams are looking to supplement their boards with people who have walked the walk," says Mark Fitzgibbon, an analyst at Sandler O'Neill. Ryan, "who has been a CEO himself, brings a lot of relevant skills to the boardroom. It's great to have an executive in the boardroom who has firsthand knowledge of the issues the CEO" faces.
It's possible that Berkshire Hills will try to follow the same path to success as Ryan's previous institution, banking experts say. Ryan built a small Maine bank into a New England powerhouse that evolved into TD Banknorth through a series of acquisitions.
Toronto-Dominion Bank (TD) bought a majority stake of Banknorth in 2005, eventually acquired the entire company two years later for almost five times the seller's tangible book value.
Ryan "knows what it is like executing larger transactions over time," says Matthew Kelley, an analyst at Sterne, Agee & Leach. "He knows the blueprint for success of turning a small community bank into a more meaningful player. It is hard for a bank to get that expertise and that track record."
Berkshire has "an almost identical strategy" to TD Banknorth, Fitzgibbon says. The company has completed six bank deals since 2005. More deals are likely after the company finishes digesting recent acquisitions.
"Berkshire has been acquisitive in the past and will put up a couple of quarters of clean results before doing more deals," says Travis Lan, an analyst at KBW. "This is a $6 billion-asset bank that wants to be much larger, so M&A will be a piece of that roadmap."
Though Berkshire has been a "reasonably active acquirer," performance and building shareholder value is management's greatest concern, says President and Chief Executive Michael Daly. Doing so could include additional deals, something that Ryan's stellar reputation would surely help with, though he says Berkshire will not grow just for the sake of growing.
"Bill's reputation and demeanor lead to some advantage in almost every aspect of banking," Daly says. "It's reasonable to assume he could help with partnering opportunities as well as talent and consumer recruitment."
Some banking experts expressed surprise that Berkshire was able to lure such a big name to its board. Directors are facing increasing workloads and challenges due to regulatory changes, and the current economic environment offers little prospect of financial payoff from serving, says Tony Plath, a finance professor at the University of North Carolina at Charlotte. Because of this, it's imperative that a potential director is a proper fit.
"People must be motivated by the cause," Plath says. "They may want to see community banks survive or have a personal relationship with other members of the board or the management team. Absent that, they probably won't take the job."
Ryan says he had many options but was "happy in retirement, doing some traveling and playing golf." Still, Ryan had always thought he would consider the perfect opportunity if it ever presented itself. Joining Berkshire's board proved to be just that chance, given the company's size, management and culture.
Daly, who knew Ryan when he led TD Banknorth, called the retired banker to discuss the possibility of adding him to the board. Daly, who was chairman prior to Ryan's appointment, was willing to relinquish that post because "like anything else, when a good opportunity presents itself, you have to be prepared to execute."
Daly "was very persuasive," Ryan says. "I thought it would be a lot of fun working with him. It just felt like the old Banknorth I remember."
Besides Berkshire, a few other banks have recently recruited experienced bankers to their boards. Peoples Bancorp (PEBO) in Marietta, Ohio, recently named David Dierker, a former chief administrative officer at SunTrust Banks (STI), to its board, while First Niagara Financial Group (FNFG) recruited Austin Adams, a former chief information officer at JPMorgan Chase (JPM).
Appointments like these can bring extra expertise, credibility and stature, industry observers say. They can also help with specific goals. For instance, First Niagara is looking to invest at least $200 million to improve its technology infrastructure; appointing someone like Adams could help.
"It's all about positioning," says Paul Schaus, president and chief executive of consulting firm CCG Catalyst. "You bring in people with talent and you're looking for their expertise to fill a need you have."
After Ryan's appointment was announced, he received numerous congratulatory phone calls from former employees, investment bankers and others, he says. An ability to build these relationships is probably the biggest asset he can bring to Berkshire, Ryan says. Besides that, Ryan hopes he can use his experience to help guide Daly.
Ryan, who retired from TD Banknorth in 2007, will serve on Berkshire's corporate governance/nominating and compensation committees.
"I think there will be some employees and other banks that will call and want to talk to me about opportunities that are here and how we can make it an even better place," Ryan says. "I think that will play out over the next year or two."