Does Boston's new economy need its own bank?
A group of local investors think so. Former Boston Private Bank & Trust chief executive Mark Thompson is leading a takeover of Admirals Bank and plans to relaunch the Boston-based institution as a retail bank serving millennials, young entrepreneurs, and nonprofits.
The new institution, which will be called Bank & Trust Company of Boston, will eventually move from Admirals' headquarters in the former Hancock Tower on Clarendon Street to space in the Seaport District.
The board of Admirals has approved the transaction, and now it's up to federal regulators to bless the deal. Thompson and his investors, which include former chief financial officer of Bank of Boston Bill Shea, agreed to buy Admirals for about $45 million. The boutique bank has a branch each in Boston and Providence.
The deal flies in the face of what has been happening in the rest of the industry. Hardly anyone wants to start a bank these days; if anything, small banks are merging with each other as a way to grow and spread out regulatory costs that have been climbing since the financial crisis.
The Boston market is brutally competitive. Just ask Citibank, which burst into town a decade ago opening branches left and right. The New York institution closed and sold off some 17 storefronts earlier this year and ended its sponsorship of the Wang and Shubert theaters. All what's left of Citi locally is private banking for wealthy customers and services for institutional clients.
"I do believe culturally it was a challenge" for Citi, said Thompson, a Gloucester native who has spent three decades in the Boston banking business. "Herein lies an opportunity for us — having that type of commitment, knowing the city and its people and its organizations as well as we do."
Thompson is bringing along Boston Private alum John Sullivan, who will become the new entity's chief banking officer, and Shea will serve as chairman of the board. Together they plan to raise $100 million in new capital over the next few months to fund the acquisition and grow the bank.
Thompson retired from Boston Financial Holdings, the parent of Boston Private Bank & Trust, in December, after helping the company grow from a local to a national player in wealth management.
But Thompson kept feeling he had one more startup in him. Before Boston Private, he had been one of the founders of Wainwright Bank & Trust Co. in 1987, an institution known for its social activism and lending to nonprofits. Eastern Bank bought Wainwright in 2010.
Shea got involved because he has been around long enough to remember a time when most of the banks were local and gave a lot back to their communities.
Both Thompson and Shea want to compete with the Bank of Americas of the world but still act and feel like a community bank. Sure, Thompson and Shea want to go after well-heeled millennials and young entrepreneurs who want high touch and high-tech banking options, but at the same time they believe in reinvesting in the community, whether it's providing loans to affordable housing developers or offering financial services to arts and cultural organizations.
Shea said other banks might see it as an obligation, but Bank & Trust Company sees a real business opportunity.
"We do this not because we have to do it," said Shea, who is also chairman of the board of Demoulas Super Markets, which operates the Market Basket chain. "Mark and his team see it as a place to lend money if we can make money."
Thompson approached Admirals Bank back in the spring about doing a deal. The timing was right because the bank had racked up two years of losses — about $1.7 million in the most recent fiscal year that ended in June.
Admirals chairman and chief executive Nicholas Lazares said the bank hasn't been profitable because it has been investing heavily in technology so it can better compete in the solar financing market. When Thompson approached him, Lazares was already thinking about breaking off the solar business from the traditional banking arm.
Admirals provides loans — typically about $25,000 — for homeowners who want to install solar panels, and that segment has been growing dramatically.
"Being a bank construct was perhaps not the best place to grow a business like that," said Lazares, who was part of a group that bought Admirals in 2010. Before that, Lazares was chairman and co-chief executive of Capital Crossing Bank in Boston.
Thompson and his investors are buying Admirals' traditional banking arm — that includes so-called bespoke banking for wealthy clientele and a commercial real estate portfolio, while Lazares will take with him the solar segment. Admirals has about 140 employees; about half will work for the new bank, and others will go with Lazares. The new bank, pending regulatory approval, is expected to open in the first quarter of 2017.
Thompson expects his new bank to grow to about 140 employees over the next five years as it builds its business. But don't expect Admirals to open too many more branches; that's not how the next generation banks. Think online, think mobile.
On the face of it, Boston needs another bank like it needs another Dunkin' Donuts. But Thompson and his team see an opportunity to make money and do good. They also tell me they want to open doors for women and minorities!
It can all sound too good to be true until you look at the companies Thompson has been a part of. Wainwright was known for being socially responsible long before it was fashionable, and Boston Private has made board diversity a priority.
Eastern Bank and other banks can lay claim to these attributes as well. But if we can have more banks do good locally, Boston will be better off.
Shirley Leung is a Globe columnist. She can be reached at firstname.lastname@example.org. Follow her on Twitter @leung.