Fighting For Market Share
Another bank is expanding lending operations into Worcester, capitalizing on what its president and CEO sees as increasing opportunities for local banks in the wake of the recession.
Fitchburg-based Rollstone Bank & Trust President and CEO Martin Connors announced this month that Rollstone will open a loan and financial services office at 11 East Central St., next to the highly visible Ninety Nine Restaurant and Starbucks, just off of Martin Luther King Jr. Boulevard.
Rollstone hopes to open the 2,500-square-foot Worcester office in mid-May, Connors said in an interview following the announcement. He said the office, which will not handle cash but will have an ATM and check deposit services available, is about visibility for Rollstone.
Big City Calls
Rollstone has been lending to Worcester area businesses for the past five years and hopes to increase its share of the area lending market with the visibility of a physical office location, he said.
Connors sees an opportunity in consumer sentiments about big banks in the wake of the 2008 recession.
“I think people are seeing that decisions are not being made locally,” he said. “Our decisions are made here.”
Besides a hometown bank feel, Connors said that local banks can provide quicker turnaround times for loan decisions than larger banks can.
Rollstone had $125 million in commercial loans as of Jan. 31, according to Connors. The bank saw a $19-million increase over the past year in commercial lending, an 18-percent increase. Connors thinks those figures can increase.
“There’s a lot of business in Worcester,” Connors said. “I think there’s enough for everybody.”
But the competition will be stiff, especially at time when many banks have more cash to lend than they have loan demand. Worcester County is one of the most “overbanked” regions in the state, according to John Merrill, Leominster-based Fidelity Bank’s president and chief lending officer. Merrill, a fixture in the local banking market, recently left Sovereign Bank for Fidelity.
Fidelity Bank built a branch on Shrewsbury Street six years ago, citing perceived value in the Worcester lending market.
Merrill said that Fidelity has never regretted the decision and that the branch continues to be the bank’s best performer. But he said that he is concerned that Worcester may eventually have too many banks and not enough demand for loans. Merrill said that area banks are entering into a competition cycle that he calls “the market share game” and predicted that more banks will move lending operations into the Worcester market over the next few years.
The reason for that, he said, is that deposits are up at many banks, but loan demand is not keeping pace. Banks want to put the money to work to earn profits. Commercial loans are a way to do that quickly, he said.
“Banks are trying to take share from other banks,” Merrill said. “We’re in a competitive business.”
And it’s not just banks looking to get a piece of the Worcester pie. Credit unions have also moved into the city, including Webster First Federal Credit Union, which moved its headquarters to Greenwood Street in 2009 and Leominster Credit Union, which just opened a branch on Shrewsbury Street.
Merrill said that the banks and credit unions that will ultimately succeed will be the institutions that know the market well and that implement a long-term strategy. Changing lending standards in order to compete with an increasing number of banks would be a mistake that could harm both lenders and borrowers, he said.
Robert Lewis, president and CEO of Bay State Savings Bank, which has a branch on Eastern Avenue just across the street from Rollstone’s new office space, said this month that high liquidity and low loan demand is a problem across the country.
“Essentially, it’s how do business people feel about the economy?” Lewis said. “We would love to put the money to work, but we can’t force money into business’s hands if they don’t want it.”
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