For evidence that hostile bank deals face long odds, look no further than TrustCo Bank Corp NY in upstate New York.
The $2.8 billion-asset bank is 0 for 6 over the past six years.
In January shareholders of Ballston Spa Bancorp Inc. in Ballston Spa, N.Y., became the latest to rebuff TrustCo.
Over the past six years TrustCo, of Glenville, has been one of the best-performing community banks in upstate New York, but it has come up empty in at least a half-dozen attempts to buy community banks there and in Florida.
So why doesn't anyone want to merge with TrustCo?
The answer, an analyst and bankers familiar with the unsuccessful bids say, is that prospective sellers are turned off by TrustCo's hard-driving tactics. What's more, its super-lean efficiency rating leads bankers to conclude that a TrustCo takeover would spell job losses and other cost-cutting measures at the acquired company.
"The mere fact that TrustCo is one to make public, unsolicited offers probably rubs people the wrong way," said Kevin Timmons, an analyst who covers TrustCo for C.L. King & Associates Inc. of Albany.
TrustCo would not make its president and chief executive officer, Robert J. McCormick, available for comment. Company spokesman Robert Leonard did not dispute that TrustCo has an aggressive takeover style.
"We have always felt that the capital region would be better served by one, strong, locally headquartered bank such as TrustCo," he said.
In 2000, TrustCo made hostile bids for Cohoes Bancorp in Cohoes and Hudson River Bancorp in Hudson. Its 2002 bid to acquire up to 9.9% of Troy Financial Corp. was withdrawn after Troy petitioned federal regulators to block the attempt.
That same year TrustCo began cold-calling banks in Florida and was rejected at least twice.
"We don't know these people," Charlie W. Brinkley, then-chairman and CEO of Southern Community Bancorp in Orlando, told American Banker in May 2002. "Why in the world would you say to someone in Florida, 'We're from New York and we want to buy your bank'? "
TrustCo's most recent acquisition was a friendly one, completed in July 2000, of the $26 million-asset Landmark Financial Corp. in Canajoharie, N.Y.
TrustCo had $2.3 billion of assets when it bought Landmark Financial. Despite its six-year dry spell, TrustCo has increased its asset size 22%, to $2.8 billion, helped by branch openings in New York and Florida.
The bid for Ballston Spa followed TrustCo's typical pattern of going to management first and then appealing to shareholders. The board of the $310 million-asset Ballston Spa rejected its initial offer of $32 a share, and then TrustCo upped its bid to $45.50 and went directly to shareholders. After failing to attract enough shares, TrustCo terminated the offer Jan. 10.
"It's unusual to me to see a bank that consistently goes the hostile route, and I think that accounts for their success rate" in acquisitions, said William H. Jones, the former chairman of Hudson River and now the vice chairman of First Niagara Financial Group Inc. in Lockport, N.Y.
(Cohoes was eventually sold to Hudson River. Both Hudson River and Troy were later bought by First Niagara.)
A source familiar with TrustCo's bid to buy a stake in Troy Financial said the offer "came out of nowhere and wasn't the kind of shotgun wedding we saw ourselves agreeing to."
The source said he was alarmed by TrustCo's interest because there was "absolutely no business symmetry" between TrustCo and Troy, leading him to believe that TrustCo planned to slash expenses.
Mr. Timmons said TrustCo is "a very lean operation," with a much lower efficiency ratio than those of the banks it has tried to buy.
On Sept. 30 its efficiency ratio was 37.5%. The average for its peer group was 56.7%, according to the Federal Deposit Insurance Corp.
"It's safe to conclude that if a deal were made between TrustCo and one of these companies, significant costs cuts would be made," Mr. Timmons said.
Mr. Leonard said the attempts failed because TrustCo refused to overpay.
"We have pricing discipline and will not damage our shareholders or our franchise by doing a transaction for the sake of completing a deal - it must make financial sense for our company," he said.
Mr. Leonard would not say if TrustCo would consider changing its approach in light of its inability to close a deal.
"Each transaction will be evaluated based on its own merits," he said. "TrustCo Bank is one of the best-run banks in the country, and we will always do what's best for our shareholders."
Its returns on equity and assets for the 2005, 26.07% and 2.07% respectively, were well above industry averages.
