Mass. Thrift Finds Bargain Deposits

A well-regarded Massachusetts savings bank is taking advantage of its region's slump to pick up cheap deposits.

In the past two weeks, Waltham-based Sterling Bank acquired the failed Woburn Five Cents Savings Bank and the failed University Bank of Cambridge from the Federal Deposit Insurance Corp.

Sterling paid $11,614 for about $125 million in deposits from University Bank. And it paid a premium of $1.8 million for the deposits and certain assets, including $10.7 million in consumer and residential loans, of Woburn Five Cents.

Plans for Commercial Business

Along with increasing its core deposit base, the lead subsidiary of Sterling Bancshares Corp. expects the moves to help it expand into commercial lending and commercial real estate lending in the suburban Boston market, said John C. Warren, president of Sterling Bank, in an interview.

Sterling's actions indicate how healthy institutions looking to expand can do so cheaply with the government's help.

In April, Sterling terminated what would have been a much more costly means of expansion - a merger agreement with Lexington Savings Bank that had been pending since last May.

And the acquisitions leave Sterling poised to exploit business opportunities after the region's economy turns around.

When the dust settles from the recent deals, Sterling, which had $560 million in assets, including $240 million in consumer and residential loans, will have $875 million to $900 million in assets, of which about $270 million will be in consumer loans.

Sterling will probably go back to the FDIC to pick up some assets other failed institutions, Mr. Warren said.

In recent years, Sterling's capital ratio has surpassed 20%. Immediately before the acquisitions, its Tier 1 capital ratio was 8.56% and its risk-adjusted capital was 15%, causing analysts to refer to it as one of the best capitalized institutions in the state.

"Sterling is making very strong strategic moves," said Gerard Cassidy, an analyst with Tucker, Anthony in Portland, Maine. "If you have the capital to do the deals, you should be doing the deals."

Since Mr. Warren came on board in 1988, Sterling has been hiring senior managers with commercial lending experience and has been looking for noninvestment areas to explore.

To date, the bank has done very little commercial lending.

"We very carefully controlled the list of products that we offered," Mr. Warren said.

Now, with a larger franchise and a hand-picked management team, the thrift will extend its reach into the pool of small and middle-market businesses in Middlesex County, he said.

"It's not that we're going to dive headfirst without checking what the water is like."

Mr. Warren moved to Sterling after 15 years at Shawmut National Bank, where he was an executive in the capital markets area. He brought with him several bankers who specialize in commercial lending and commercial real estate.

Mr. Warren likes to call Sterling "the strongest community bank in Middlesex County." Now, he said, "We're going to have some fun proving this to people."

Image Prompted Name Change

Sterling, which last fall dropped the name Waltham Savings Bank to distance itself from the problems of the thrift industry, now has 13 full-service branches, as well as a limited branch in the high school in Lexington, Mass.

When Woburn Five branches reopened Monday under the Sterling name, Mr. Warren was in one of the offices talking with customers over coffee and donuts, assuring them their deposits were safe.

"Banking is a real business of confidence," the 46-year-old banker said during the interview.

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