Four summers ago, about 10 veteran bankers from throughout the region visited The Sun for a roundtable discussion on the state of their industry and how their individual operations were weathering what had become a deep recession — the worst since the 1930s.
Their general view: Yes, the national economy (particularly the mortgage-lending industry) is suffering. Yes, the big national banks have behaved very badly. And despite that, things are pretty cool here.
Four years later, those points can be summed up, in order, as follows: Yup, absolutely and not quite.
Not everybody made it, per se. In April 2010, the former Butler Bank became the first Massachusetts bank to be seized by the Federal Deposit Insurance Corp. since 1994. It was eventually taken over by Connecticut-based People’s United Bank.
A little more than a year earlier, Lowell Cooperative Bank was recapitalized, and converted to a privately held stock institution. New management, led by Richard Bolton, was brought in.
The other three Lowell-based banks — Enterprise Bank, the Lowell Five Cent Savings Bank and Washington Savings Bank — were all on more sound footing, but executives there all held various degrees of worry about what their futures held.
Fast-forward to today. Several big banks have suffered, including Bank of America, Citigroup and most recently, J.P. Morgan Chase. Smaller institutions have generally fared better, although there is still grumbling nationwide that they’re more stingy about lending.
The government weighed in as well, and in a big way. In July 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank for short. The new legislation, named for its two main authors, former U.S. Sen. Christopher Dodd and outgoing U.S. Rep. Barney Frank, is designed to make financial institutions more transparent about their finances and operations. So-called “bank stress tests” are part of the deal.
The law has more than its share of critics, in no small part due to its sheer volume. According to a recent story by OneNewsNow, Ammon Simon, policy counsel at the Judicial Crisis Network, said the law took 2,319 pages to enact, and contains 3,826 pages of financial regulations and guidance.
For banks, that takes time, it takes resources and, of course, it takes money. And who do you suppose is most disadvantaged by this?
That’s right. Small banks.
But in Lowell, anyway, a funny thing happened from there to here: Lowell-based banks, right now, are doing great.
Washington Savings Bank has seen loan volume increase 18.8 percent, year over year, through the first six months of this year and deposit growth increase 10.9 percent, according to CEO Jim Hogan. The bank has held the highest possible rating (five stars) from bank consultant Bauer Financial for 85 straight quarters.
Enterprise Bank reports steady loan and deposit growth of about 9 percent each quarter and announced Friday that it will open its 21st branch office early next year, in Lawrence.
And Lowell Cooperative, under Bolton, reversed a $2.4 million loss in 2010 to a profit of $920,000 last year, according to figures provided by Bauer. It has clawed back from a zero-star rating — “troubled and problematic” — to an “adequate” rating of three stars.
But at the top of the local list, at least in terms of year-over-year comparisons, is the Lowell Five. The city’s oldest continuously run bank (founded in 1854) recently announced that through the first six months of this year, deposits are up 23 percent and loans are up 21.3 percent from the same time a year ago. That’s about triple the statewide averages of 7.5 percent and 7.8 percent, respectively, according to Lowell Five President David Wallace.
Wallace cites the bank’s physical expansion — it recently opened its first New Hampshire branch in Nashua, and plans to open another office early next year in North Andover, as well as a high-school branch at Nashoba Valley Technical School in Westford — its marketing strategy and diversity of customers.
“We’ve been able to pick up a lot of business with municipalities,” he said in a telephone interview on Tuesday. “We’ve been working with treasurers and town officials. We’ve also been helping out general contractors who have had trouble getting bonds secured.”
Wallace also said deposits are likely getting a boost from people’s added propensity to save, given their desire to deleverage from high debt levels incurred from the early stages of the most recent recession.
“We bankers try to play the yield curve and with 10-year Treasurys down to 1.5 percent, that means there’s no yield to speak of for savers,” he said. “But we do offer strength and stability.
“What we’re hearing is that we’ve been responsive to people’s needs.”
Wallace said the Lowell Five’s stability can be seen in its Tier 1 capital ratio, which he said ranks fourth in the state (among 68 Massachusetts-based banks) at 13.5 percent. The figures is basically a measure of how effectively banks can protect against losses.
Lastly, Wallace said the bank got a $3.5 million boost when it was able to take off the books a loan it made to the former owners of the Grandview condominium complex out on Pawtucket Boulevard. The loan eventually resulted in a deed in lieu of foreclosure, where the borrower conveyed all interest in the property to the Lowell Five to satisfy a loan that was in default (and avoid foreclosure proceedings).
Lowell Five’s improved financial performance recently earned it a five-star rating from Bauer Financial.
The costs and resource challenges of Dodd-Frank are real. But Lowell-based banks have, on balance, proven to have weathered the storm.