The devastating loss of lives in the attack on the World Trade Center robbed many community bankers of their closest relationships with the investment community, relationships in which boutique firms like Sandler ONeill & Partners LP and Keefe, Bruyette & Woods Inc. often played a key role.
For some banks, their ties to those firms played a particularly crucial role because their only research coverage emanated from Sandler or Keefe Bruyette.
The two highly specialized firms employ many analysts who cover small-cap banks exclusively in contrast with larger, more diversified investment banking firms that opt not to compete for the smaller clients business.
Mary Lou Hague, Marni Pont ODoherty, Joseph Roberto, and David H. Winton were analysts at Keefe Bruyette who covered regional and community banks and, in some cases, were the only analysts following those banks. All are missing since the attacks. From the Sandler staff, Chris Orgielewicz and Jeff Smith are missing, and Daniel McNeill has been confirmed dead.
Eight companies that Keefe Bruyette analysts had covered exclusively are now temporarily without any assigned analyst, including NewMil Bancorp. Inc. of New Milford, Conn., and Civic BanCorp. of Oakland, Calif. Sandler analysts were the exclusive followers of five companies, among them Rome Bancorp Inc. in New York and Monterey Bay Bancorp Inc. of Watsonville, Calif.
Both Sandler and Keefe Bruyette have stressed their continued commitment to the relationships, and they left no doubt that the companies affected would not remain without coverage for long.
These banks tend to be smaller companies we tend to grow up with, said Andrew Senchak, vice chairman of Keefe Bruyette. We will restore service to them. Thats what we have to do, and that is who we are.
Keefe Bruyettes regional offices in Boston, San Francisco, and elsewhere are in touch with these companies and sustaining relationships that, very often, have an investment banking component, he said.
In many cases, the companies in question were brought public by either Sandler or Keefe Bruyette.
Sandler brought us public six years ago, said Vincent Palagiano, the chairman and chief executive officer of Dime Community Bancshares Inc. of Brooklyn, N.Y. After the initial public offering, about one-third of its investor base came through the analyst contacts, he said.
These analysts opened doors to investors, Mr. Palagiano said. Analysts are extremely important.
Dime lost two analysts of the seven covering the $2.72 billion-asset company Kevin T. Szocik of Keefe Bruyette, who is still missing, and Mr. McNeill of Sandler. Even in a group of analysts that small, Mr. Szociks research often had a very strong impact on Dimes stock. He had downgraded Dime on Aug. 23 to outperform from buy and said that it had gotten pricey. Shares of Dime began to fall immediately, enough to prompt him to upgrade the stock back to buy only five days later.
Mr. Palagiano said that road trips with Mr. McNeill were an important way to communicate with investors and that such contacts created a personal relationship of trust and mutual understanding.
Frank J. Barkocy, the director of research at the buy-side firm Keefe Managers Inc., said smaller banks may not always be comfortable in the early stages of analyst scrutiny but quickly learn the value of having the relationship. Analysts not only give companies increased visibility but also create a higher degree of credibility, he said. Without analyst coverage, it is difficult for companies to diversify their investor base.
Many analysts have a strong bond with the companies they follow, Mr. Barkocy said. In the wake of the attacks, junior analysts will need mentoring and time to understand the companies and develop relationships, he said. It will not happen instantly.
Coverage by Keefe Bruyette and Sandler is particularly important for smaller banks, he said. Both firms did an excellent job to bring these stocks to investors early on.
Bryce Rowe, an analyst at Anderson & Strudwick in Richmond, Va., agreed. Those core competencies got them where they are now, and the tragic attack wont take them away.
