Newport
The corporate marriage combines two regional financial institutions of approximately the same size in assets and with complementary banking activities, executives of both banks said. None of Lake Sunapee’s 35 branches in New Hampshire and Vermont are expected to be closed, the executives said, although they acknowledged the sale would result in layoffs of some employees.
“Bar Harbor is a true community bank with a strong community banking structure and that’s what we believe in, too,” Steve Theroux, chief executive of Lake Sunapee Bank, said in a Friday telephone interview. “One of the nice things about this merger is the geography — there is no overlap” in branches.
Lake Sunapee Bank will retain its name, Theroux said, and also assume some of Bar Harbor’s operations, such as its trust division. Customers will not notice any difference in service or communication, he added, since Bar Harbor’s data processing operations also will migrate to Lake Sunapee’s system.
“All of our customers who have been familiar with our employees and customer service reps, none of that changes,” Theroux said.
The sale of Lake Sunapee comes as small banks have continued to grapple with serving a customer base — middle-class families and workers — whose incomes have stagnated in the aftermath of the 2007 to 2009 recession. Community banks principally rely upon customer account fees and loans for residential and commercial real estate for revenue, all which are growing slowly and face stiff competition from national banks and online providers.
“Community banks’ share of U.S. banking assets and lending markets has fallen from over 40 percent in 1994 to around 20 percent” in 2015, a study by the Harvard Kennedy School reported last year.
More problematic, however, is the rise of online and mobile banking, which has been leading to fewer transaction visits by customers to branches and requires banks to shift resources into new technology.
Last year, Vermont’s Merchants Bank, citing the impact of technology on its business, let go 6 percent of its workforce, and Claremont Savings Bank recently closed its Cornish Flat branch due to a decline in customer traffic.
Under the definitive merger agreement, Bar Harbor Bankshares will acquire Lake Sunapee Bank Group in an all-stock transaction valued at $17 per share. Lake Sunapee Bank Group, the parent company of Lake Sunapee Bank, closed up 10.7 percent to $15.59 per share on Friday.
Bar Harbor Bankshares closed down 5.5 percent to $32.45 per share.
After the deal is completed, Bar Harbor shareholders will own 59 percent of the company, while Lake Sunapee shareholders will own 41 percent.
The banks said the deal would result in substantial operating savings, some $7.3 million during the first year and another $10.1 million in the second year, according to a filing made with the Securities and Exchange Commission.
The deal also incurs a “one-time” cost of $16.9 million, which Theroux said was partially due to lawyer and advising fees and projected severance costs.
Each bank excels in areas where the other is less prominent.
For example, Bar Harbor has a bigger commercial real estate portfolio, while Lake Sunapee is a larger lender in home loans. Lake Sunapee also has a much bigger trust — money management — operation than Bar Harbor, in addition to owning the insurance agency McCrillis and Eldredge.
Lake Sunapee “is a terrific bank and its culture is very much like ours,” Curtis Simard, chief executive of Bar Harbor Bankshares, said in a telephone interview from his office in Bar Harbor, Maine.
He said the banking philosophy and management style of each bank’s executive team and employees meshed well; combined, the institutions would nearly double their assets to more than $3 billion.
“We’re a publicly traded company that is looking for growth but growth consistent with our principles,” the 44-year-old Simard said. “We’re a community bank and (Lake Sunapee) is a community bank. They will keep their brand and no branches are being contemplated to close.”
He added that the acquisition will make Bar Harbor Bankshares, whose Bar Harbor Bank & Trust unit operates 15 branches, the only New England-based community bank with a “footprint” in Maine, New Hampshire and Vermont.
Lake Sunapee’s Theroux, 66, said he will retire from his executive role after the sale is completed, likely in the first quarter of 2017, but will have a seat on the Board of Directors.
The deal requires federal, state and shareholder approval.
Lake Sunapee Bank, founded in 1868 and originally known as Newport Savings Bank, expanded into Vermont in 2013 when it purchased the Randolph National Bank.
In 2015, the parent company changed its name to Lake Sunapee Bank Group from New Hampshire Thrift Bancshares to reflect the bank’s broader move into trust management and insurance.
John Lippman can be reached at jlippman@vnews.com or 603-727-3219.
