Bank RI buys N.Y. firm, expands lease services

Thursday, May 19, 2005

Bank Rhode Island is aiming to bolster its array of commercial banking products with its first major acquisition, recently buying a New York-based equipment leaser, the bank’s chief executive officer says.

Bancorp Rhode Island announced May 16 the purchase of Plainview, N.Y.-based Macrolease International amid continued openings of BankRI branches in the Ocean State.

“We are a commercial bank first and foremost, and typical of the services that commercial banks offer is equipment leasing,” said Merrill W. Sherman, president and CEO of holding company Bancorp Rhode Island.

The business-model strategy of acquiring Macrolease, Sherman said, is threefold.

First, it enables BankRI to offer its own product to customers that lease equipment. It also gives the bank a vehicle to provide financing for its clients in the business of leasing manufactured items to their customers. Lastly, Sherman noted, the leasing company adds $20 million to $25 million in leased assets – which bring earnings – to Bancorp Rhode Island’s balance sheet.

Macrolease financed some $20.4 million in leases in 2004, according to the bank.

Sherman explained during a recent interview why BancorpRI chose to purchase the out-of-state company rather than opening a new equipment-leasing division here.

“There was not enough commercial leasing business in Rhode Island to support a company,” she said, adding that the bank also lacked in-house expertise of equipment leasing to launch a local operation.

Macrolease adds to the bank’s portfolio a firm with a proven track record in commercial leasing, as well as the people with the necessary skills, Sherman said. The company’s market encompasses much of the Northeast and beyond, she added.

Daniel W. West, who has served as CEO of Macrolease, will continue to run the company he founded in 1969 as president. BankRI executives will remain in Rhode Island, and none will assume roles at Macrolease, which will continue to operate in New York, Sherman said.

Bancorp Rhode Island reached a non-binding agreement with Macrolease in January to purchase the leasing company for an aggregate sum of $1.9 million, to be paid in shares of the corporation’s common stock in three allotments over five years, the bank said.

Sherman declined to comment on how the addition of Macrolease would impact stock performance or profit projections for 2005, which she said have not been made public in accordance with securities regulations.

David W. Darst, a research analyst of commercial banking stocks for Nashville, Tenn.-based FTN Midwest Research Securities Corp., said it would be two to three years before the bank capitalizes on the purchase of Macrolease, but the investment should have no adverse impact on profits this year.

“It’s a longer-term growth prospect for (BankRI), rather than something they will see (profits from) in the short-term,” Darst said.

The potential benefit of growth, naturally, would be that the bank’s stock becomes a higher yielding investment, Darst noted.

“I think it’s a good decision,” he said. “It gives (BankRI) the opportunity to increase their non-interest income by selling leases.”

Though Bancorp is now an interstate operation, Sherman said plans are to keep expanding BankRI in-state, where it plans to open five more branches (which would bring its total to 20) over the next two to four years.

The bank brought its total number of branches to 15 this month with the opening of a branch in Lincoln. Next month a 16th branch is slated to open in East Greenwich, and the next planned banking outlet to open in early 2006 is under construction in Pawtucket, the bank said.

To establish the bank as a statewide operation, Sherman said, it plans to build three more branches among the towns of Barrington, Narragansett and South Kingstown.

Since BankRI opened shop in 1996 with 12 branches (acquired through a deal with Fleet Financial Group to purchase Shawmut banking houses) it has increased assets from $465 million to $1.3 billion and deposits from $421.1 million to $901.1 million as of March 31, the bank said.

Earlier this month, the bank raised $21.5 million in capital through the sale of 628,418 shares of common stock. Sherman confirmed that the Macrolease deal precluded the stock sale, which had no bearing on the decision to purchase the leasing company.

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