When Joe Campanelli took over leadership of Needham Bank in January 2017, banking observers started a countdown on how long it would take before the venerable community bank would go public.
“Anything can happen,” the Needham Bank President and CEO said in a 2017 Boston Business Journal interview when asked if he intended to take the bank public. “The one thing I’m not good at is predicting exactly what’s going to happen in the future.”
The answer to “how long” turned out to be seven days short of seven years. On Dec. 28, the bank’s stock began trading on the Nasdaq Stock Market under the symbol NBBK. Its initial performance has been positive as the stock, offered at $10 per share, has consistently traded in the $13.50 range since its debut.
When the planned offering was first announced in the spring, it was expected to yield proceeds of $300-350 million. According to S&P Global, the gross proceeds of $410 million were at the “supermax” of the offering range and represented the second-largest standard conversion in the last 15 years, behind Eastern Bankshares Inc.’s October 2020 deal.
Campanelli said he understood the reasoning behind the expectations for the bank going public under his leadership. “Back in 2017 and 2018, because I’d run public companies before, people said, ‘You’re gonna take Needham public, right?’”
“I spent a lot of time thinking about it. It certainly wasn’t a sudden decision.”
Two years into Campanelli’s tenure the bank took a significant step toward going public, converting in 2019 from a mutual cooperative bank to a mutual holding company, often a signal that conversion to a stock bank is in the offing.
“The only reason I would go public was (to acquire) capital,” Campanelli said. “We had a bunch of capital at that time and we were able to reposition that capital and fill in voids in the market.”
One example of the bank’s repositioning was its acquisition of Eastern Bank’s cannabis business in 2022. There was no sale price, as the transaction was a transfer of a business line that had about $500 million in deposits.
Campanelli had investigated the industry, including making multiple visits to the cannabis-pioneering state of Colorado. “We had real estate investors and developers coming into the bank saying, ‘Guess what? That mattress company is no longer there now. It’s a dispensary.’ You sort of scratch your head and ask, ‘Well, is that legal?’”
Because cannabis is still considered an illegal controlled substance at the federal level, many financial institutions remain leery of serving the sector, especially those with federal charters.
“But it’s here. It’s real. It’s got a lot of smart money behind it,” Campanelli said. “If it’s here, we should understand it, and we should bank it with care.”
By early 2023, the bank had grown from $2 billion to $3.3 billion in deposits, and Campanelli felt the time was right for the public offering. It was seen by some as a counterintuitive move at the time, with persistent high inflation and a post-pandemic construction slump contributing to a shaky banking sector that was skittish about lending.
The environment looked even more perilous when the failures of Silicon Valley, First Republic and Signature banks required intervention by the Federal Reserve in early 2023, but Campanelli was not deterred.
“The people questioning it, it’s not my job to educate them,” said Campanelli. “But it was the best time for a mutual to convert. I mean, there was no doubt in our mind or our board’s mind. This wasn’t ‘let’s throw darts at the wall and see what sticks.’ This was well thought out over the years.
“We’ve lived through these cycles before. So you want to be future-ready. You want to be opportunistic when the time comes. And you want to have a lot of dry powder because you just don’t know what the market brings you.”
Depositors stepped up
Because mutual banks are owned by their depositors, not by stockholders, conversion to a stock bank required the approval of the depositors. Despite collectively owning the bank, depositors have no say in how the bank operates and an extremely limited ability to monetize their ownership.
Depositors voted in favor of the conversion in July. While they were technically ceding their collective ownership, they were simultaneously positioning themselves to cash in.
Under banking regulations, mutual bank depositors are first in line to purchase the newly minted stock, ahead of the general public, at the pre-IPO offering price of $10 per share. So when the window was opened in October to subscribe, depositors pounced.
The offering was managed by investment bank Piper Sandler. Their representative Nick Lawler explained that state and federal regulators set limits on how many shares the bank is able to sell. In this case it was just under 41 million, with each eligible depositor permitted to subscribe for up to 80,000 shares.
“In this particular instance depositors requested to purchase more than 41 million shares, so some of the larger orders were cut back. Most depositors were able to get their orders filled in full,” Lawler said.
The newly public bank now has more than $4 billion in deposits, and Campanelli believes the banking sector is poised to improve, especially if interest rates are lowered. Even with all the organizational changes, he said Needham Bank will continue to brand itself as “the builder’s bank.”
“We’re building lots of different things, not just residential housing,” he said. “In my view, everybody wants to build something.”
That building will continue to be supported in and around Needham, as Campanelli said any expansion will likely occur inside the Route 495 belt. “It’s a great market,” he said. “We know the streets. We know the people. We know the communities. There’s no need to go somewhere that we don’t know.”