Bank Size May Not Matter To Central Mass. Customers
PHOTO/RICK SAIA
There are many banks serving Central Massachusetts, with some in close proximity to each other, like these branches of TD Bank and Commerce Bank on Route 9 in Shrewsbury.
Fortunately, for businesses that are ready to finance new investments, there’s plenty of competition among banks and credit unions that want to be the ones to make the loans. The variety of institutions — from credit unions with one branch to enormous international banks — could make for complicated choices for companies seeking financing.
Some smaller banking institutions say that the years since the financial crash of 2008 have been good to them. The wave of foreclosures, regulatory scrutiny and internal reorganizations that hit big banks had less of an effect on small ones, leaving them ready to pick up the slack.
“We benefitted from that,” said Brian Thompson, president and CEO of Worcester-based Commerce Bank. “We grew, probably at a time what the market wasn’t growing. We were gaining market share from others as they were doing other things during that time.”
Between June 2008 and June 2012, Commerce nearly doubled its deposits from the Central Massachusetts area, from $678 million to $1.2 billion, the largest percentage increase of any major local financial institution, according to the Federal Deposit Insurance Corp. (FDIC). Thompson said the bank is “an ideal size.” It’s big enough to offer a range of services and products, yet small enough that any given borrower is likely to know members of the senior management team and the head of the lending department, as well as their local lender.
“We’re very much involved in the community,” Thompson said. “Sometimes, as you get too big, it’s hard to deliver that same kind of personal approach.”
The ‘Community’ Difference
Loosemore said businesses he works with at the chamber often agree with that sentiment. Doing business with local banks or credit unions, small-business owners are working with bankers whose children go to the same dance lessons or play basketball with their own kids.
“A few of the people I’ve talked to and some of the stories I’ve heard anecdotally, they just feel the big bank is a little colder,” Loosemore said.
And yet, the data do not necessarily show a shift in popularity from large to small banks in recent years. If Commerce saw the greatest percentage increase in local deposits from 2008 to 2012, the institution with the largest gain in dollars was Bank of America, which rose from $2.3 billion to $3.4 billion.
And while Bank of America is nearly synonymous with “big bank” in the minds of many people, Central Massachusetts Market President Edwin Shea said the bank acts like a small organization in many ways. Like Thompson, he said his staff are part of their local communities and have a strong knowledge of the businesses they work with.
Shea, who is also the bank’s business banking market manager covering Eastern and Central Massachusetts, said the bank as a whole is at a “pivot point,” where it’s refocusing its energy on delivering locally after shedding non-core assets. In 2012, for example, Bank of America hired 30 small-business bankers in Massachusetts to strengthen its lending capacity.
“We let the top of the house take care of any cleaning up,” he said. “Our folks are local. They’re here in the community.”
Overall, big banks seem to be improving their public image a bit today. A survey by J.D. Power and Associates found that consumer satisfaction with large banks improved 16 points on a 1,000-point scale between 2012 and 2013. That brought the big institutions to 759, compared with 785 for midsize banks and 760 for regional institutions.
J.D. Power said big banks have improved the quality of their personal service and addressed many consumer complaints about fees.
The local leader of another of Central Massachusetts’ most active big banks, Sovereign Bank Region President Brian Azar, said the question of how customers think about big versus small banks can be misleading. While some people may have a knee-jerk reaction against the phrase “big bank,” he said, research shows that many customers who are asked about large banks identify them as local institutions, and vice versa.
“It really comes down to that (personal) touch,” he said. “It’s not about big versus small or one being better than the other. Our customers see us as a local player in Worcester.”
Sovereign is in the middle of a rebranding effort that — at least to some — might make it look even more like a big bank. The institution is taking on the name of its Spanish parent company Santander, one of the biggest banks in the world.
But to Azar, the shift is a way of signaling that the bank is both a local institution and a powerful brand with worldwide connections. For local companies that do business internationally, like a Worcester manufacturer with a location in Brazil or a client in England, he said, that can make a big difference when it comes to choosing a bank to work with.
“We’ve got a global network here at the bank where we can tap into senior leaders in other countries to put them in touch with resources to facilitate those needs,” he said.
The FDIC numbers show Sovereign’s deposits in Central Massachusetts dropped from $2.3 million in 2008 to $1.8 million in 2012. Azar said the numbers tend to “fluctuate wildly” since they represent one-day snapshots and he thinks deposits have been fairly steady.
When it comes to lending, he said, Sovereign was very active, even in the depths of the credit crisis. “We were always out there, very steady, supporting our customer base,” he said.
These days, he said, other lenders seem to have become more active in the market. “It is hypercompetitive,” he said. “Everyone’s trying to steal each other’s clients.”
Aiming At A New Market
Grafton Suburban Credit Union is working to be one of the new players involved in that competition, according to President and CEO Lloyd Hamm Jr. Hamm said the credit union, which has been pulling back from a focus on home refinance loans as rising rates have slowed that market, will roll out a business loan program by the start of 2014.
He said the credit union isn’t trying to be a big player in commercial loans, but plans to aim for smaller deals with local companies. “I want to do loans for businesses I can drive to at lunch,” he said.
James Garvey, president and CEO of St. Mary’s Credit Union in Marlborough, said credit unions are able to take a different approach than shareholder-owned banks. He said St. Mary’s can take a longer-term view than the old Flagship Bank, where he was once CEO.
“Our primary focus isn’t on making x percent more than we made last year,” he said.
Garvey said the credit union, with a history of serving the area’s French-Canadian immigrants, is targeting the current generation of immigrants as well as other individual and business customers that larger banks might not try to win.
“We really reach out and try to find the very small customers that today may not be as attractive to large banks,” he said.
When it comes to the commercial lending side of things, Garvey said there’s certainly a great deal of competition among banking institutions of all sizes. Still, he said, he started working in the area’s lending markets right out of college, and there’s never been a time when there weren’t multiple players looking for lending opportunities.
“There’s a lot of competition today, but five years ago I would have told you there’s a lot of competition,” he said. “I don’t know what business you don’t hear that in.”
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