A Philadelphia-area thrift is becoming one of the first companies to take advantage of a new enterprise zone, moving its headquarters closer to the commercial customers it's pursuing.
The move to downtown Norristown, a small city in fast-growing Montgomery County, is Commonwealth Bancorp's attempt to save money and at the same time reach what an executive called "the heart of its franchise."
Fifteen of the $2.1 billion-asset thrift's 51 branches are in Montgomery County.
"It's a large, economically diverse county, with a lot of commerce," said Patrick J. Ward, Commonwealth's chief financial officer.
He said that Commonwealth, which converted from mutual to stock form last year, is trying to grow through commercial loans. Mr. Ward said that being in an office park in the neighboring Chester County borough of Malvern hasn't made it easy to solicit commercial business in the area.
Moreover, that headquarters building has gained value as commercial real estate prices in Philadelphia's Main Line suburbs have risen, Mr. Ward said.
The company has agreed to sell its headquarters and expects to make about $1 million on the deal in the first quarter of next year.
It also is getting a good lease deal on its building in Norristown because the area was declared a state enterprise zone last year. Enterprise zones offer companies tax incentives, as well as grants and loans for relocating or expanding in designated areas.
Charles H. Meacham, president of Commonwealth Bancorp, said the move is a chance to help the community as well as get an attractive rental rate. Montgomery County helped Commonwealth secure grants and low-interest loans as part of the deal.
An analyst said the bank's move makes sense.
"I think the strategy is sound," said James P. Benson, with Ryan, Beck & Co. in Philadelphia. "In order to earn higher returns on equity, they need to conduct a much more banklike business. This is one of the moves they'll have to take to get there."
The thrift company's return on equity is currently between 7% and 8%.
Mr. Ward said Commonwealth needs to better employ some of the $90 million in fresh capital realized from the 1995 conversion. The goal is an ROE in the mid-teens.
