New England regionals Shawmut National Corp. and Citizens Financial Group continued their expansion drives through the Northeast, announcing separate deals on Monday.
Shawmut agreed to buy Northeast Federal Corp., based in Hartford, for $172.1 million, or just over book value. Meanwhile, Scottish-owned Citizens said it would pay $139.9 million, or 1.9 times book value, for Quincy Savings Bank.
Shawmut said the deal -- which includes 17 branches in upstate New York near Albany -- was part of a strategy to expand beyond New England.
"With this deal we were able to do a few things -- gain market share in New England, realize economies, and add a fifth state" to our market, said Joel B. Alvord, chairman and chief executive officer of Shawmut, based in Hartford and Boston.
"Clearly, over time we'd like to expand in upstate New York," he said.
Wall Street Luke-Warm
On Wall Street, where word of the deals boosted New England bank stock prices, the Shawmut deal received a luke-warm response.
"It's a cautious market extension that makes sense," said Lawrence W. Cohn, a bank analyst at PaineWebber. Mr. Cohn noted that the demographics of the Albany and western Massachusetts markets are similar.
Citizens, a $9 billion asset unit of The Royal Bank of Scotland PLC, agreed to buy Quincy Savings in its third acquisition in Massachusetts in the past 14 months.
Quincy, with $833 million in assets, will give Citizens, based in Providence, No. 1 one or No. 2 market share in several upscale communities along the southern shore of the state. The acquisition will add 14 branches to its existing 54 branches in Massachusetts.
"This is a big day for us," said Lawrence K. Fish, Citizens' chairman, president, and chief executive officer. "The area from Quincy south to Cape Cod is one of the fastest-growing areas in New England."
Quincy disposed of $30 million in nonporming assets last year. "The management of Quincy has done a bang-up job, and this is the reward for it," said Jeffrey Cohn, an analyst at H.C. Wainwright, Boston.
As shares for other Northeastern banks like Eastern Bancorp Inc., based in Williston, Vt., and Rochester Community Savings Bank gained, Shawmut's shares closed at $23.875, down 12.5 cents.
Northeast has $3.6 billion in assets and $2.5 billion deposits. Shawmut's purchase price translated to $10.875 per fully diluted share. The deal is structured as a tax-free exchange with Northeast shareholders receiving .456 shares of Shawmut stock for each Northeast share.
Shawmut said it expects to save $17 million by the end of 1996, or 31% of Northeast's current expenses of $55 million. Most of the cost savings will come in the New England branches -- Northeast has eight in Connecticut and eight in Massachusetts -- where there are market overlaps.
Shawmut Liked What It Saw
Shawmut said it expects the deal to add 5 cents to per-share earnings in 1995 and 14 cents to per-share earnings in 1996.
Shawmut had bought 10 New England branches of Northeast this spring, and apparently liked what it saw.
"As we got further into that transaction, we started to look at the whole organization," Mr. Alvord said. "But the branch transaction was too far along to pull that back."
Shawmut said it expects to close the deal by the fourth quarter.
Shawmut will market trust and mutual fund products to Northeast customers. Northeast specializes in consumer mortgage banking and retail deposit banking.
In a smaller deal, First Fidelity on Monday was awarded four branches of failed thrift John Hanson Federal Savings Bank, Beltsville, Md. First Fidelity, based in Lawrenceville, N.J., paid the Resolution Trust Corp. a deposit premium of $4.3 million for the $66 million in deposits.
Wilmington Trust Co. bought a single branch of John Hanson. The branch, in Salisbury, Md., gives the retail and trust bank its first retail operations in the state.