The chief executive of KNBT Bancorp Inc. of Bethlehem, Pa., said it will get stronger management on top of a bigger product selection and more investment revenue by buying its first broker-dealer, Oakwood Financial Corp.
Oakwood is to be renamed KNBT Securities under the deal announced Tuesday by the holding company of Keystone Nazareth Bank and Trust Co.
Oakwood’s Gerard Hallman, who founded the Allentown, Pa., company in 2001 along with Richard Jennings and Kevin Serensits, is to be KNBT Securities’ president.
The KNBT chief executive, Scott V. Fainor, who is also its president, said the experience of the Oakwood management team and the similarities of the two companies’ client bases helped the $2 billion-asset KNBT feel comfortable making this deal.
It is important that “the acquisition strategy meets the expectations of shareholders” and to acquire a management group that can make the integration of client bases go smoothly, Mr. Fainor said in an interview Wednesday.
The three started Oakwood after holding management positions at Lehigh Securities and Summit Financial Services.
Mr. Fainor said KNBT has been working with Invest Financial Corp., a third-party marketer based in Tampa. Under this arrangement KNBT sells mutual funds, annuities, and other investment products in its branches, but it wanted to expand its offerings and reach more clients. Owning a full-service broker-dealer will help it do that, the CEO said.
KNBT serves more than 100,000 customers in 41 branches in Lehigh, Northampton, Carbon, and Monroe counties. Oakwood, which has clients throughout the Lehigh Valley region, provides insurance products in addition to brokerage and investment products.
KNBT also offers mutual funds, bonds; stocks; annuities, separately managed accounts; life, disability, and long-term-care insurance; and retirement planning, asset allocation strategies, and education planning.
Eugene Sobol, KNBT’s senior executive vice president, chief financial officer, and chief operating officer, said, “We have been trying to expand our financial products and increase our asset base.”
Geoff Bobroff, the president of Bobroff Consulting in East Greenwich, R.I., said some banks that buy broker-dealers “have a hard time integrating sales professionals.” For those that are good at cross-selling, such as Wachovia Corp. and U.S. Bancorp, “it’s probably not a bad choice,” he said.
But brokerage firms take on more risk than traditional bankers, because they have more liability in securities underwriting, Mr. Bobroff said.
“Banks have to anticipate that risk,” he said.
Oakwood would be KNBT’s first acquisition since its October 2003 purchase of the $611 million-asset First Colonial Group Inc., the parent of Nazareth National Bank and Trust Co., for $87 million in stock.
Asked if he is mulling other acquisitions, Mr. Fainor said, “We look at many different things and will continue to consider quality opportunities.”
KNBT did not say what it is paying for Oakwood or when the deal is expected to close.
