TrustCo Bank Corp NY has not acquired a bank since July 2000, but not for lack of effort.
The $2.8 billion-asset Glenville, N.Y., company has made offers for at least five banks since then, only to be rejected by each target. Now it is trying again. On Monday it made an unsolicited offer of $45.50 a share - or about $34 million - for Ballston Spa Bancorp Inc. in upstate New York.
Robert Leonard, a spokesman for TrustCo, said Monday that it decided to approach Ballston shareholders with "a generous cash offer" after Ballston's management rejected an earlier offer of $32 a share. He said that the two management teams met in mid-September, and that Ballston quickly indicated it had no interest in selling.
"We asked if they wanted to know the price we were offering, but they said no," Mr. Leonard said. "That told us they weren't really working for their shareholders."
TrustCo substantially raised its offer because the price of Ballston's thinly traded stock had increased 28% since the initial meeting, as word of a potential buyout leaked out, he said. The stock rose another 4.27% Monday.
Ballston Spa is the parent of the 167-year-old Ballston Spa National Bank, the oldest of the three banks headquartered in Saratoga County.
Through a spokeswoman, the company's president, Christopher R. Dowd, declined to comment. But in a letter to shareholders Monday, Ballston urged investors not to tender their shares until it had a chance to consider the offer. It said it had hired a financial adviser, and its legal counsel promised to respond by Dec. 16.
Hostile takeover bids rarely succeed, but Kevin Timmons, an analyst who covers TrustCo for C.L. King & Associates Inc. in Albany, said the bid for Ballston might have more than a fighting chance.
"The pricing looks high enough to get shareholders interested," he said, "It's hard to call. If there are enough shareholders looking for liquidity, TrustCo has a shot."
Mr. Leonard said TrustCo's offer works out to 49 times Ballston's 2004 earnings of 92 cents a share. That multiple is significantly higher than the average for acquisitions. According to Highline Data, buyers have offered 26 times the seller's earnings in 218 deals reported between Jan. 1 and Monday.
Mr. Leonard said TrustCo could run Ballston's nine branches more efficiently and profitably than the company's management has. According to the Federal Deposit Insurance Corp., Ballston reported a profit of $1.1 million for the first nine months of the year. Its return on equity was 6.9%, and its efficiency ratio was 82%.
By contrast, TrustCo's efficiency ratio through the first three quarters was 38%, well below average for a commercial bank, while its return on equity was 26.8%, according to the FDIC.
That ruthless efficiency apparently scares off potential targets, analysts say. TrustCo has a reputation for keeping a tight control over expenses, and integrating less-efficient banks would almost surely lead to job cuts.
In recent years TrustCo tried to buy two banks in Florida. Closer to home, its bids for Cohoes Bancorp and Hudson River Bancorp Inc. in 2000 received the cold shoulder. In 2001 it filed an application with the Federal Reserve Bank of New York to purchase up to 9.9% of Troy Financial Corp., but the bid was withdrawn after Troy petitioned regulators to block it.
Cohoes later sold itself to Hudson River, and First Niagara Financial Corp. of Lockport, N.Y., later bought Hudson River and Troy.
TrustCo, which has 13 branches in Saratoga County, is one of the largest banking companies headquartered in upstate New York. Since it has not been able to expand through acquisitions, it has instead been adding branches in the New York metropolitan area and in Florida. Since 2002 it has opened offices near New York City, in Westchester County, N.Y., and Bergen County, N.J., as well as seven in Florida.
"The past few years we've been focused on downstate [New York] and Florida, and that is going to continue," Mr. Leonard said. "But we have always had our eyes and ears open for other opportunities.
