With an economy dominated by small businesses and a banking scene dominated by large national and regional banks, Rhode Island has become an expansion target for Massachusetts banks. iStock photo
As Massachusetts banks search for additional deposits, Rhode Island has become an opportune place to look.
The number of Massachusetts banks with branches in Rhode Island has exploded in the last five years.
There are 51 branches in the state are owned by Massachusetts-chartered banks today, according to FDIC data. In 2020, there were only 20.
Rhode Island may not be the regional economic powerhouse that Massachusetts is, but its economy has plenty of features that make it attractive to community and regional banks.
And according to FDIC data, large national players and recently merged institutions such as Citizens Bank, Bank of America, Washington Trust and Santander make hold 74.9 percent of the deposits in Rhode Island.
For Massachusetts community banks, that marks the state as a good target for their more hands-on and personal service.
A Short Hop for Many Banks
For some of the Massachusetts banks targeting Rhode Island as their next growth market, the attraction has been simple: It’s right next door.
Bristol County Savings Bank has long viewed Rhode Island as a logical place to search for new customers. The Taunton-based lender was the first Massachusetts-chartered bank to move into the state in 2001 and prior to that it had a loan office in 1999.
It continued that recently with a new branch office in Providence, one of the newest in Rhode Island owned by a Massachusetts bank, following a commercial loan office opened there in 2024.
“I think community banking translates very well in the state of Rhode Island,” Bristol County Savings’ Chief Revenue Officer Tim Chaves said. “Rhode Island is all about relationships. It’s all about tight-knit communities, and it’s a state that is driven by small business and lower middle market business, and that translated very well into our commercial banking platform.”
Boston-based Eastern Bank’s $490 million acquisition of Brockton-based HarborOne Bank, netted it seven branches in Rhode Island.
Similar to Bristol County, the proximity to Eastern’s footprint made the HarborOne acquisition a logical move, bank President and COO Quincy Miller said. Additionally, Eastern had prior relationships in the state due to its foundation’s philanthropic work.
“It opened up the door to go a little further south, not that far into Rhode Island – which we had been working in both from a philanthropic perspective – through a credit perspective,” Miller said. “We had a mortgage originator – who, ironically, just retired – down in Rhode Island for over a decade. So being able to physically come into the market of Rhode Island was an exciting opportunity for us because to really be local, you need to be there.”
Other Massachusetts banks with Rhode Island footprints: Beacon Bank, with 22 branches in Rhode Island; BayCoast Bank, with eight branches; BankFive, with two; and Milford Federal Bank with one.
Rhode Island Economy Attractive
The Rhode Island economy has undergone a transformation in recent years. The state struggled to bounce back after The Great Recession and was historically reliant on manufacturing.
Since then, the economy shifted towards education and healthcare, and state government has plowed resources into developing nascent offshore wind and life sciences sectors.
Both the state’s GDP growth and personal income have lagged other New England states in real-dollar terms since the COVID-19 pandemic. The Massachusetts GDP grew 2.4 percent last year, while Rhode Island’s grew 1.1 percent, the second-lowest growth rate in New England behind Maine, federal Bureau of Economic Analysis data shows.
But due to the number of small businesses in Rhode Island, community banks can find plenty of customers to help them succeed, Bryant University economics Professor Liam Rice said. According to U.S. Small Business Administration data, small businesses account for 51.1 percent of Rhode Island’s private workforce, compared to 44.7 percent in Massachusetts.
“That concentration of small firms means the commercial deposit and lending market in Rhode Island falls heavily within the relationship-banking model that community and regional banks build their books on,” Rice said.
Additionally, the Rhode Island deposit market is highly concentrated and showing signs of disruption at the middle tier, according to Rice.
Providence-based Citizens Bank holds 36.72 percent of the state’s $42.55 billion total deposits, while Bank of America holds another 20.41 percent according to FDIC data.
Notably, the data shows TD Bank lost nearly a third of its Rhode Island deposits in a single year, falling from a 4.16 percent share to 2.68 percent.
“The combination of low entry cost, a concentrated deposit market losing mid-tier ground and a high small-business density still makes Rhode Island one of the more logical expansion targets available to Massachusetts regional banks in New England when compared with expansion into other states,” Rice said.
Disruptors Amid Consolidation?
Bank leaders interviewed for this story said they see an opportunity to gain deposits from consumers who are looking for a more personal and local feel compared to the larger players that dominate the state.
“Rhode Island is built for community banks,” Bristol County Savings President and CEO John Silva said. “It is dominated by the large banks, but those banks have been moving up-market and leaving what we do well – the small business and the consumer – for us to bank and serve.”
Eastern Bank might be a larger institution, but it believes it can still fill the need for a community bank, Miller said.
In part, it plans to do that by being physically present and involved in the Rhode Island community in a similar way to how it operates in Massachusetts.
“I’m in Rhode Island a lot, building relationships down there,” Miller said. “As soon as we went to Rhode Island, the commitment was, we have to be present. We’ve got to be in Rhode Island just like we’re in Massachusetts. We got a great, talented group of colleagues who joined us. We’ve been recruiting more to help us win in the state of Rhode Island, but we feel like our model of ‘scale, but in a community way’ gives Rhode Islanders another choice.”
As it moves into a new market, Eastern is planning to adjust how it operates to fit the local economy, Miller said.
Sam Lattof
“What is similar that we have a playbook for and what’s a little unique that we have to tweak and be flexible on? We talk about those things.” he said. “Should we be creative in you know, how our businesses work together? If there’s something unique in Rhode Island that we would do differently in Massachusetts, how do we build the systems or the processes to be able to meet the market where it is?”
For Eastern that can be tweaking the loan approval process or the loan total that a customer receives. It is about adjusting to the state and not forcing Rhode Island to adapt to Eastern Bank’s way of doing business.
“It’s not figuring out how Rhode Island fits into Eastern,” Miller said. “It’s figuring out how Eastern fits into Rhode Island.”
Along with the number of large institutions, the state is also seeing a large number of consolidation in the banking industry. Most recently Santander merged with Webster Bank.
Bristol County Savings’ Chaves believes that his bank’s new branch location indicates a larger commitment while other institutions might be looking elsewhere.
“That’s why we open that downtown Providence branch,” he said. “That means we’re there to stay. I think we’re well positioned to take advantage of the market displacement that’s happening with these mergers that are going on. We compete well against the large banks.”
