More than a dozen new banks are starting up in New Jersey this year, two of them in greater Princeton. First Choice Bank opened on Whitehead Road in Lawrence, and the Bank of Princeton launches this week on Chambers Street. Doors opened April 23, and the grand opening is Saturday, May 5, from 11 a.m. to 3 p.m., with a ribbon cutting at noon.
Such a flurry of new banks has not been seen since 1999 and 2000. Not coincidentally, many consolidations took place just before those years. Bank mergers do spur the launch of new banks, says Peter Crowley, CEO of the Bank of Princeton. “There really is a market opportunity because of consolidation, and now Chase and CitiBank are moving in here. Smaller banks meet the need for personalized service.”
Ross Wishnick, vice chairman of the Bank of Princeton, is convinced that smaller is better. On the day before the bank’s official opening, he met with two future clients who want to take their accounts from a large bank and move to a small one. “They have a very successful business, and they want someone to talk to. They don’t want to ask for a loan that has to go up for approval through levels of management.”
“Even at a regional bank like Commerce Bank,” says Crowley, “decisions get bumped up to committees outside of the market.” He likes to point out that no new community bank has opened in Princeton in 50 years. “We will target businesses in this community — legal, professional — and consumers who are looking for a different approach to banking than what they can get in Princeton. Decision makers in our bank are empowered to help those customers.”
Meanwhile two formerly small community banks, those that have not been gobbled up by mega banks, are having some growing pains. Both Roma Bank and Yardville National Bank (YNB) are beleaguered by dissident shareholders. Roma, which has its first annual meeting as a public company on April 25, is fending off an attack on its capital distribution plan. YNB faces a proxy challenge from a stockholder who objects to the bank’s earnings record.
Shareholder problems can be prevented, says Stephen Distler, chairman of the Bank of Princeton. “Banks or corporations get into those kinds of problems when management loses sight of the investor base and its needs, or of the customer base and its needs. That creates unrest that can splash out into a messy confrontation. We are designing ourselves as being community-minded across the board. We haven’t even opened and we have sent three communications to shareholders. Information is the best way to keep everyone on board in a positive way.”
Soon to come: An advisory board that will drive business but will also reflect the geographical and demographic diversity of the catchment area. “We are trying to do the right thing long term for investors and customers,” says Distler.
Another hedge against shareholder rebellion is that nobody owns more than 4 percent of the stock. Says Distler: “It will be very difficult for one person to acquire any meaningful percentage of shares.”
Crowley has 25 years of experience with big banks, most recently as senior vice president at Bank of America and also at PNC and Midlantic banks. and Citibank; he also worked at Union Carbide Corporation. The son of a programmer for the telephone company, he graduated from the College of Holy Cross in Worcester, Massachusetts, in 1973. He met his wife while both were earning their MBAs at Temple; she is a senior financial director at Johnson & Johnson and they have two grown sons.
Distler is a Class of 1974 alumnus of Tufts and has a Wall Street background. He and his wife, a pediatrician, have three children in college. Most recently he was managing director at Warburg Pincus, and he chairs the fundraising campaign for the relocation of the University Medical Center at Princeton. He also chairs the non-partisan think tank, the Center for Policy Research of New Jersey.
Though Wishnick is also a 1974 graduate of Tufts, he was an engineer and never met Distler, a liberal arts major, at school. He is a residential developer in a family firm that pioneered in building retirement communities. His wife is also a developer, and their youngest child is at Princeton High. He was also a founding director of a successful community bank, First Washington Bank, which grew from $3 million to just under $500 million in 15 years. (Based in Windsor, First Washington now has 16 branches, 115 employees, and nearly $600 million in total assets).
Vincent N. Tozzi, is chief financial officer, Gerard A. Murray, chief lending officer, and Barbara A. Cromwell is in charge of retail banking.
The board includes Andrew Chon (formerly of Lucent and Samsung), Richard Gillespie (founder of the ad agency by that name), John Horvath and Dennis Maculsky of the CPA firm Horvath & Giacin, Janet Lasley of Lasley Brahaney Architecture and Construction, J. Scott Needham of Princeton Air Conditioning, attorney Robert N. Ridolfi, and Jeffrey Sands (managing member of Hilton Realty).
Also on the board are James Riley, an insurance executive with Marsh Inc; Eric Steinfeldt, a civil engineer; Henry Opatut, a residential developer; Casey K. Min, the head of an organic home improvement product firm; entrepreneur Emmett J. Lescroart; W. Andrew Krusen, a merchant banker; Kevin Kenyon, a residential mortgage broker; Bumsung Han, an electronic product distributor; and Gregg Chaplin, a chemical importer.
This lineup can be expected to funnel business to the new bank, and most new banks do get their business, for the first 12 or 18 months, through their investor base, says Distler. “Over time there is a subtle shift to word-of-mouth referral business.”
Though this bank starts out small, it will most likely grow. For instance, in seven years Hopewell Valley Community Bank has grown to have six branches. Unlike Roma, which was founded in 1920 and has eight branches, or YNB, which was founded in 1925 and has 33 branches, Crowley is talking about adding just a few additional branches.
The first branch is supposed to be at the former Mike’s Tavern on Bayard Lane, and the application (revised, according to suggestions from the site plan review advisory board) is on the zoning board agenda for May 9. “We’re optimistic about receiving zoning approval, as the plan sites the building effectively and, we believe, significantly enhances the Route 206 landscape with minimal impact on our local traffic,” says Distler. Possible future sites could be in Plainsboro, Montgomery, or Hamilton.
Though Crowley predicts that the Bank of Princeton and First Choice won’t trip over each other in their expansions (First Choice is likely to open new locations to the south, he predicts), both will end up opening in Hamilton. Thirty percent of Mercer County’s deposits come from Hamilton, which has a trove of small to medium-sized businesses.
Here’s an interesting contrast: Princeton Borough and Township combined have just under 30,000 people, yet Princeton weighs in with 20 percent of the county’s deposits. Hamilton has a population of 87,000 yet has just 10 percent more in deposits. The difference is that Hamilton’s money comes from businesses, whereas Princeton’s is from wealthy families.
The new bank’s predominantly green decor, planned by St. Louis-based New Ground, is deliberately unusual and, in fact, will be entered in a national contest. “It is difficult to differentiate one’s self in the banking business,” says Wishnick, “so we want to make an extreme impact in the environment that we create and the experience that the customer enjoys.”
Art works throughout the bank, and on the website, have been made by severely challenged artists from Tim Lefens’ nonprofit, Art Realization Technologies. One LCD screen has an events calendar and displays bank promotions. On the other wall, a screen will show images of Princeton taken by David Kelly Crow and updated on a regular basis. Says Ross: “We are grounding ourselves in the community.”
The Bank of Princeton, 21 Chambers Street, Princeton 08542-3719; 609-921-1700; fax, 609-921-8350. Peter M. Crowley, CEO. www.thebankofprinceton.com
First Choice Bank
The newly-formed First Choice Bank has already added a new location at 231 Clarksville Road. Ehab Abousabe, who had a mortgage banking operation called United Capital on Clarksville Road, has joined the bank. His three-person office will function as the residential lending department of the bank on Whitehead Road. Consumers can apply for mortgage loans at either location.
“They came to me with the opportunity,” says Abousabe. “It is a great team to work with and provides an unlimited source of leads.”
Abousabe, 36, is the son of a microbiologist at Rutgers. He went to Rutgers, and though visual art and television production was his avocation, he went directly into mortgage banking and founded his own firm in 1995. The company has been located, at various times, at the Village Shopper retail center on Route 206 and at Research Park.
Traditional mortgage brokers send the paperwork to the lenders to complete. “As licensed mortgage bankers we have the ability to do this,” he says. “When our loans go to lenders, they are complete and ready to close.”
Abousabe has weathered the current mortgage storm quite well, he says, because he never made the questionable subprime loans that are causing so many problems now. “We operated differently from the start. Our market is the accounting and financial firms. We assist those firms to assist their clients, and we don’t deal with people who can’t afford a house.”
“I was not happy with the market operation at its height,” he says. “We are not getting hate mail.”
First Choice Bank, 231 Clarksville Road, Suite 8, Princeton Junction 08550; 609-439-9080; fax, 866-685-1650. Ehab Abousabe, vice president consumer lending. www.firstchoice-bank.com
At Roma Bank’s first annual meeting on this Wednesday, April 25, in Robbinsville, it will face objections from a New York-based investors group, Stilwell Value Partners. Joseph Stilwell protests what he says is the bank’s lack of a capital allocation plan.
Though his group holds six percent of the shares, the bank controls 69 percent of the shares. He cannot block the choice of directors, but he has said he will withhold votes as a protest, and he urges other stockholders to do the same.
Roma Bank raised $98 million last summer with its initial public offering, and the share price has risen from $10 to about $16. Roma’s net income for the year was $5.2 million, or 19 cents per share, compared to $7.5 million in 2005. But revenue went up, from $37.5 million in 2005 to $44.3 million in 2006. With a fourth-quarter profit of $2.2 million, it will pay its first quarterly dividend, six cents, to minority shareholders of record as of April 18. On Monday, April 23, the stock price was $16.22, down from a 52-week high of $16.87.
Both directors on Roma’s slate are octogenarians and have been associated with the bank for more than 50 years. Simon H. Belli, 83, used to own a construction company. Rudolph A. Palombi Sr., 80, was the bank’s president from 1978 to 2000.
It started out helping Italian immigrants with home ownership. When the bank went public last year, it had eight branches in Mercer and Burlington counties, and had broken ground for a ninth branch in Plumsted in Ocean County.
“In light of the action by this stockholder, which could cause the company to incur unnecessary expenses, the company believes it is important to announce it has already begun a dividend plan,” was the bank’s response to Stilwell’s filing.
“Senior management and the board of directors of the company have been instituting actions to deploy the capital raised by the public offering in accordance with the plans described in the prospectus which accompanied the offering,” said CEO Peter Inverso in a statement filed with the SEC.
Inverso, also a Republican state senator from Hamilton, has said he will not seek that office again to that he can devote his time to the bank.
Roma Bank (ROMA), 2300 Route 33, Robbinsville 08691; 609-223-8200; fax, 609-223-8303. Peter Inverso, CEO. www.romabank.com
Proxy fights are expensive. “As to the activist dissident shareholder, it’s become somewhat of a cottage industry,” says Patrick M. Ryan, CEO of Yardville National Bank. “We’ll continue to see that type of activism in small publicly held banks as we go forward.”
YNB did its IPO in 1995. On Monday, April 23, it traded at $35.25, down from a 52-week high of $40.
At the bank’s annual meeting on July 12, Ryan will face a challenge from shareholder Lawrence Seidman, who challenges three seats on the board. A similar challenge did not work last year. Seidman has a history of complaining that Yardville is underperforming.
In a telephone interview Seidman says the bank has an earnings problem, a credit quality problem, and a regulatory problem. “Very few banks have supervisory agreements with regulators,” he says. He has also challenged how the dates for the annual meeting were set.
Saying he owns about 1 million shares, or about 9 percent, he claims he bought the stock because he thought it was undervalued. “It is hard to say what is wrong from the outside, until we get people on the board. But the stock is up since I got involved.” Seidman says he is running another proxy contest for another bank (Center Bank Corp.) and that he owns a “a significant number” of other bank stocks. These holdings, however, do not exceed five percent the total shares, so he is not required by the SEC to reveal them.
The son of a furniture salesman, whose mother ran a candy store, Seidman majored in marketing at St. Peter’s College, Class of 1969, he has a law degree from American University and worked at the SEC before going into securities law with large law firms and a private practice.
Seidman estimates he has staged “25 or 30” proxy fights over his lifetime. “The shareholders were very happy with the results.”
“Banking has become a very crowded industry, with a record of start-ups, and it will be interesting over the years,” says CEO Ryan.
Yardville’s Patrick M. Ryan should not be confused with Patrick L. Ryan, the beer distributor who helped to found Hopewell Valley Community Bank.
One of 12 children, YNB’s Ryan was raised in Buffalo, where his father had his own company and also was a salesman for a larger firm. He feels most inspired by his mother, “a diligent, hardworking woman who always felt she could DO something. When there was a challenge or a job to be done she rolled up her sleeves and did it.” She opened a yarn shop after her children were grown.
A 1967 graduate of Notre Dame University, he has made banking his career, coming to Yardville in 1992. He and his wife, Sandy, have five sons and one of them, also named Patrick, works at Yardville Bank.
The bank continues to be profitable, but Ryan admits that the banking environment is “very very challenging, partly because of the regulatory costs of Sarbanes Oxley. “It has gone up to $750,000 or $1 million a year, a major accounting expense,” says Ryan, who at one point met with Oxley and tried to convince him that small companies should not have to meet the same regulatory levels — and costs — of large ones.
Ryan cites what he calls the inverted yield curve. “Typically banks like to borrow short and lend long. When the costs are inverted, costs are higher, shorter, and the yield is lower. It squeezes the net interest market.” The good news, he says, is that YNB has not been involved in subprime loans that are being castigated today.
Yardville National Bancorp (YANB), 4556 South Broad Street, Box 8487, Trenton 08650-8487; 609-581-2809; fax, 609-584-5984. Patrick M. Ryan, CEO. Home page: www.ynb.com