Flush with capital from its $95 million public offering last year, Legacy Bancorp Inc. in Pittsfield, Mass., is eyeing its first-ever retail expansion into neighboring states.
The $768 million-asset thrift company, whose origin dates from 1893, has no branches outside of Berkshire County. To reach its goal of $1 billion of assets - and to deploy its capital - chief executive J. Williar Dunlaevy said that Legacy must look at buying or building in faster-growing markets.
In an interview after an investor presentation in New York this month, Mr. Dunlaevy said the company is considering expansion into northwestern Connecticut, southern Vermont, and in particular, the Albany, N.Y., area. Albany is home to New York's state government, and the region has several top universities and research facilities that are growth engines, he said.
"It's not Florida," Mr. Dunlaevy said, comparing Albany with one of the nation's fastest-growing states. "But it is growing modestly. More so than Berkshire County."
The county's economy is strong in pockets - scenic communities such as Lenox and Great Barrington are popular tourist spots - but its population has declined by more than 5% since 1990, according to census data.
By contrast, Rensselaer and Albany counties across the border in New York are growing and present more opportunities for Legacy to boost loans and deposits, said Bret Ginesky, an analyst at BankAtlantic Bancorp Inc.'s Ryan Beck & Co. Inc.
"Legacy is growing loans, but for it to achieve real growth, it is going to have to expand into New York," he said.
Legacy has already had some success in Albany. Its lenders have been making commercial loans in the market for about five years, and in July it opened a loan production office there. Legacy now has about $50 million of commercial loans outstanding in the market, Mr. Dunlaevy said.
New York law prohibits state-chartered thrifts like Legacy from branching into New York without buying a charter first. Mr. Dunlaevy said his company is considering both whole-bank acquisitions there or buying a charter from anywhere in the state that could then be used to open branches in the Albany region.
He said his company could branch into Vermont and Connecticut without buying a charter first but that his preference is to acquire in those states.
Mr. Dunlaevy joined Legacy, then known as City Savings Bank, in 1969 and became its CEO in 1995. Under Mr. Dunlaevy, City Savings created a mutual holding company, bought two Berkshire County thrifts, changed its name to Legacy in 2001, and completed its conversion to full stock ownership in October 2005 with the intention of using the proceeds to fund expansion.
Legacy is now the second-largest banking company in Berkshire County, and its Legacy Banks subsidiary has the No. 2 market share there, with nearly 18% of the county's deposits in its 11 branches.
But Mr. Dunlaevy said that "the world is changing" and that community banks like his need about $1 billion of assets to stay competitive - and independent.
"It used to be that if you were a $100 million-asset bank you needed an exit strategy," he said.
Given the costs of marketing, compliance, and developing competitive products and services, he said, "there's no doubt that [threshold] has risen in recent years. I don't know how a little bank does it."
