News

Bank seeking $10.6M bailout

By Paul Leighton
Staff writer
Published: January 13, 2009

BEVERLY — Beverly National Bank has received preliminary approval for $10.6 million in federal bailout money, but its second-ranking executive says the bank is not in danger of failing.

"The bank's doing very well, it really is," said Michael Gilles, the senior executive vice president and chief operating and financial officer. "This is by no means a sign of weakness. We look at it as an insurance policy and also an opportunity to grow in the future."

Gilles said Beverly National Bank applied for the money when the program was first announced by the federal government in October. The Capital Purchase Program, as it is officially called, is part of the larger bailout package designed to revive the U.S. economy and increase the flow of money to businesses and consumers.

Gilles said the program is designed not just to prop up struggling banks but also to help healthy banks stimulate the economy by making more loans available for businesses and individuals.

"If they give it to us, it's because we're a good bank, and we've got a bright future ahead of us," he said. "They want to put money in the hands of banks that are going to grow."

But David Jacobson, an accounting professor at Salem State College, said banks should not be accepting bailout money if they don't need it. He said Beverly National Bank might not want to publicly admit they are having money problems.

"Either they're in financial trouble or they're taking money they don't need," he said. "Either way, it wouldn't endear that bank to me."

Beverly National Bank needs the approval of shareholders before it can accept the $10.6 million in federal money. Gilles said shareholders must vote to waive their right of first refusal to buy the additional shares of common stock that will be offered to the government. The U.S. Treasury supplies the money by buying bank shares.

Gilles said the waiver must be approved by two-thirds of the bank's 400 to 500 shareholders. The vote will be taken sometime in February.

Banks taking the bailout money must agree to rules that limit the pay of top executives and prevent banks from handing out "golden parachute" payments to executives. The federal government has provided $177.5 billion to 214 financial institutions since October under the Capital Purchase Program, according to the U.S. Treasury Web site. Eight of those banks are in Massachusetts.

Beverly National Bank has three offices in Beverly, as well as branches in Salem, Danvers, Hamilton, Manchester and Topsfield.

The bank had total assets of $483 million as of Sept. 30, 2008, according to the Federal Deposit Insurance Corp.

Gilles said the bank has laid off no employees and has none planned. He said bank customers have no reason to worry.

"If they're a loan customer, it just means we'll have more money to lend," he said. "On the deposit side, they have nothing to worry about anyway, and it will add an additional layer of comfort because we'll have more capital."

Massachusetts banks receiving bailouts

State Street, Boston$2 billion

Boston Private, Boston$154 million

Berkshire Hills Bancorp., Pittsfield$40 million

Wainwright Bank & Trust, Boston$22 million

LSB Corp., North Andover$15 million

OneUnited, Boston$12 million

Central Bancorp, Somerville$10 million

Leader Bancorp, Arlington$5.8 million

Source: U.S. Treasury