"Here’s one way to put [this] in context: Peoples Federal Savings Bank earned a grand total of $13 million — before taxes — over those same three years. Yes, compensation for top executives and directors exceeded the profits of the entire business those years. As you can imagine, I wanted to ask people at the bank how that worked out. But Sullivan and Leach did not respond to my messages, left over the course of more than a week."
"Depositors reject local bank’s Wall Street plans; In Beverly, rare uprising preserves a community institution — for now" by Jay Fitzgerald | Globe Correspondent September 02, 2014
Massachusetts has lost many of its community banks in recent years, in part because some converted from private to publicly held companies, opening the door to acquisitions by bigger banks — and to big paydays for executives.
But last month, in a development that industry officials consider unprecedented, depositors at tiny Beverly Bank blocked a plan by its executives to convert to public ownership, meaning that the company would sell shares on a stock exchange. The vote of 238 to 205 in favor of the proposal fell short of the two-thirds majority needed for approval.
“It was a little bit of a surprise,” said Michael Wheeler, chief executive of the 126-year-old bank, which has four branches and $332 million in assets.
Analysts, however, called it a startling rebuke to a community banking industry that, they say, has grown accustomed to having depositors rubber-stamp private-to-public conversions.
Cornelius Hurley, director of the Center for Finance, Law and Policy at Boston University, said the Beverly Bank vote shows that bank executives can no longer take the support of depositors for granted.
“There just seems to be people saying, ‘Enough is enough,’ ” Hurley said.
The fate of community banks, many with roots that have been in place in their towns since the 1800s, is of particular interest to consumers, small businesses, and nonprofit groups — many of whom have grown to rely on the banks’ local lending and charitable giving programs.
Since 2000, Massachusetts has lost a quarter of its banks — many of them community institutions like Beverly Bank — to the waves of consolidation that have swept the industry.
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Until recently, conversions to public ownership happened infrequently, and that has raised concerns among critics, who worry that conversions often harm communities while enriching top executives.
Otherwise known as money junkies.
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Community bankers say conversions are often necessary to raise capital to compete against larger banks, as well as to meet post-financial crisis rules that require banks to maintain larger capital cushions. Small banks, they add, are grappling with low interest rates and increased regulatory costs that cut into profits and available capital.
I'm so tired of hearing record-profiting banks whine.
In Beverly, Wheeler said the next steps for the bank are unclear. Options include asking for a new vote, staying the course as a cooperative bank controlled by its depositors, or possibly merging with another community bank.
Depositors who blocked the conversion were concerned that the community would lose another locally owned bank, the Salem News reported. John Somes, executive director of the Greater Beverly Chamber of Commerce, noted that recent banking history is a touchy issue in Beverly.
The city once had three local banks, but Beverly Bank is the last of those three local banks....
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