New players widen the Granite State banking field

More banks, and even a brand new one, mean greater offerings for customers

Economic improvement may be slow, but banks are seeing opportunities arise in New Hampshire.

Last year, Lynn, Mass.-based Eastern Bank moved in – officially acquiring New Hampshire’s Centrix Bank in October – and Maine-based Camden National established a new commercial lending office in Manchester. This year a brand new bank is looking to set up shot in the Manchester area in 2015.

And New Hampshire-based institutions like Sugar River Bank are making moves. The Newport-based Sugar River opened a loan production office in Concord last April and is currently constructing a new full-service branch there.

“We have seen an increase in the number of banks that are headquartered out of state opening branch and loan offices in New Hampshire,” says Christiana Thornton, president and CEO of the New Hampshire Bankers Association.

“I do think that speaks to New Hampshire’s strong economy [compared to] other parts of New England.”

“It’s a good time to take advantage of opportunities,” says Joe Conway, vice president of commercial lending at Sugar River Bank.

“In our case, it’s a matter of Sugar River expanding into this market,” says Conway. “This new office will be the bank’s first expansion in the last, roughly, 20 years, and it was natural progression for us to look at a branch at the bottom of I-89, based on the location of some of our customer base.”

With the help of a consulting firm, Sugar River – which has locations in Warner, New London, Sunapee, Grantham and Newport – found many of its customers worked in the greater Concord area.

State Banking Commissioner Glenn Perlow thinks the positive growth of bank branches in New Hampshire reflects the quality business to be done here, with opportunities in both commercial and residential lending.

“We have a relatively strong and growing economy here. It could be growing faster or stronger, but compared to other parts of the country, there are opportunities,” says Perlow.

While banks are investing more in commercial loans, the core of most banks in New Hampshire is residential lending, says Perlow.

“Obviously, the downturn in real estate after the crisis slowed that down considerably, and there’s a lot of new federal regulation that makes it a little harder space for the banks to work in, but it’s still a significant portion of the banks’ portfolios,” says Perlow. “And I know residential prices are rising, so that will always be an important sector for the banks.”

A new bank

While the recession has been hard on the banking industry, with many small banks consolidating, New Hampshire may soon be home to the newest bank in the country, Primary Bank.

Primary is a proposed local bank that would establish its first location in Bedford. Primary gained momentum through a grassroots effort, developing a support base of mainly Bedford-based businesspeople.

There are 13 proposed directors, including President and CEO Bill Stone, who has 30 years of banking experience in southern New Hampshire, working with Southern New Hampshire Bank & Trust after it was renamed Bank of New England.

“We haven’t had a new bank in New Hampshire for over five years, but we believe given the consolidation in the industry, resulting in having a number of big banks here in the state, that the business community is looking for the smaller institution to provide services to them,” says Stone.

Primary is awaiting confirmation from the state Banking Department and Federal Deposit Insurance Corp., approvals that Stone expects by the second quarter of this year.

Perlow says there has not been a new application for a U.S. bank since 2010, and only one has been approved: Bank of Bird-in-Hand, which serves the Mennonite community in Lancaster County.

Stone is currently working on a date for the next capital round, which will occur early this year.

“We have a very strong board of directors, a very strong management team that we’ve put into place. We’ve had a very successful initial capital round where we raised $3 million with a total investor base of over 130 investors,” Stone says.

“On the deposits side of the bank, we will be offering all of your customary deposit services, from checking, savings, money market accounts, etc., available to the consumer and commercial prospect,” says Stone. “On the lending side, we will focus more on business lending, which will include everything from small business loans or commercial investor loans, multi-family, commercial lending, capital lines of credit, all focused on the smaller business customer in the state.”

“We’re very enthused about the news we may have a new bank opening in New Hampshire,” says Thornton. “It’s not something we have seen in New Hampshire for some time, but really, nationally, this is going to be a huge move forward, and everyone across the country will be watching to see if the FDIC approves this new charter.”

One thing in favor of Primary Bank is the health of New Hampshire’s banks in general, since it’s generally agreed that the state’s banking industry is in better shape than others around the country.

“New Hampshire’s unique in that we experienced our own financial crisis in the early ‘90s and we saw a number of bank failures at that time,” says Thornton. “In many ways the bankers that are CEOs today were around in that time and they learned from that experience. If you look at New Hampshire, we didn’t have any failures during the [most recent] economic downturn.”

She says many banks have loan portfolios that are stronger than there were seven or eight years ago, when the recession struck.

But no one would describe the banking atmosphere as robust. The economy is instead improving in incremental steps, potentially due to many factors not seen in other economic recoveries, the bankers suggest.

“We believe given the consolidation in the industry, resulting in having a number of big banks here in the state, that the business community is looking for the smaller institution to provide services to them,” says proposed Primary Bank President & CEO Bill Stone.

“The passage of Dodd-Frank was the largest piece of reform legislation in many, many years, and it has resulted in a number of new federal regulations, literally thousands of pages … that banks are having to be nimble and respond to,” Thornton explains. “That is a significant burden, especially among our smaller community banks who may not have as much compliance resources available.”

One amendment was made to Dodd-Frank in the December federal omnibus bill that negates the rule that banks trading derivatives would have to create an affiliate for the task. Thornton said the rule did have an impact on some banks in New Hampshire, primarily national and regional banks, but also community banks in some cases.

It was a provision that worried banks about the costs they would have to pass on to business customers, she says, adding that she expects there will be efforts to further amend Dodd-Frank this year.

“It takes time to bring it back to that happy medium, where you can operate somewhat normally, but the checks and balances that caused the prior economic crisis are sufficient, in place, so we don’t repeat the errors of the past,” says Conway of Sugar River.

The Bankers Association will also continue efforts to amend federal and state regulations that give credit unions tax-exempt status, something that Thornton says is an unfair advantage, especially as their roles change and they take on commercial lending.

For instance, Portsmouth-based Service Credit Union recently announced the closing of a construction facility loan to a Massachusetts-based resort developer for the development of RiverWalk, a resort hotel planned in Lincoln, N.H.

“If they want to provide the same services that banks are providing, they should be treated equally,” says Thornton.
Also on the horizon is a bill sponsored by state Sen. Jeb Bradley – a measure that would “essentially modernize” regulations over a hundred years old, in some cases, in order to simplify the process for a bank to establish a branch in New Hampshire, says Perlow.

The bill would also change how the Banking Department is funded, collecting examination fees and specific administrative costs tied to the size of each institution, versus the traditional across-the-board dollar amounts.

To top off the 2015 forecast for New Hampshire banks, the Federal Reserve is likely to raise interest rates.

“There’s every indication that sometime in the third quarter or later in 2015 that the Fed will raise interest rates, which, if done carefully, should help the banking sector be more profitable,” says Perlow. But the Fed is still treading cautiously in deciding whether the economy is robust enough for an increase in rates.

Perlow, however, feels positive about the 2015 economy.

“I personally am a very optimistic person, and I know the banks are strong and positioned to creatively work in this landscape,” he says. “There are always headwinds – the financial crisis produced a lot of federal regulations that makes it difficult for particularly small banks to remain competitive – but I think the banks have learned to deal as best as they can, and it’s going to be a good year.”