People's United Closes Acquisitions - Analyst Blog

People's United Financial Inc. (PBCT) has closed the acquisitions of LSB Corporation and Smithtown Bancorp Inc. The acquisitions are in line with the company's strategy of expanding its presence in its markets.

Acquisition Details

North Andover, Massachusetts-based LSB Corporation is an $800 million bank holding company. Its subsidiary River Bank has seven branches – five in north of Boston and two in southern New Hampshire. People's United acquired LSB Corp. in an all-cash transaction, valuing it at $94.8 million. Each LSB Corp. share was valued at $21.00.

Smithtown Bancorp on the other hand is based in Smithtown, New York, and is a $2.3 billion bank holding company. Its subsidiary, Bank of Smithtown, has 30 branches on Long Island and one in New York City. This acquisition was valued at around $56.4 million or $3.77 per share. Of this, People's United paid around 53% in cash and the rest through People's United common stock.

Our Take

People's United, which competes with companies such as New York Community Bancorp Inc. (NYB) and Hudson City Bancorp Inc. (HCBK), to benefit from a healthy business portfolio that has grown inorganically over time. With about $25 billion in assets, the company provides consumer, commercial and wealth management services through its subsidiary, People's United Bank, with nearly 340 branches in Connecticut, Vermont, New Hampshire, Massachusetts, Maine and New York.

We believe that while the R.C. Knox and Chittenden acquisitions continue to generate income flow, Financial Federal complements its existing business lines – particularly PCLC – its equipment financing subsidiary. Its purchase of the deposits and banking operations of Butler Bank represents an excellent opportunity for expansion in the greater Boston area.

People's United is trying to overcome the challenging economic environment through opportunistic acquisitions and a stable interest margin. Recent acquisitions coupled with reported positive earnings reflect its strength in capital and liquidity. Nevertheless, its balance sheet remains sensitive to weak credit quality, increasing loan loss provisions and higher net charge-offs against decreasing non-interest income.

People's United currently retains its Zacks #3 Rank, which translates to a short-term Hold rating.