For the past few months, Mercantile Bank has been fielding some strange calls – strange, anyway, for an institution of its type.
Mercantile keeps its loans small, usually around the $1.5-million mark, and sticks close to its home in and around Boston. But lately callers have asked for commercial loans of up to $12 million, and been calling from around the state and beyond.
“We’re getting calls from very far afield, from clients we’ve never heard of before,” said Charley Monaghan, Mercantile’s president.
Adds Fred McGrane, senior loan officer, “We’ve been asking the question ourselves: ‘What’s going on?’”
What’s going on is the very public financial woes of Mercantile’s big brother banks, such as Sovereign Bank and Citigroup. That’s resulted in a flight to smaller institutions by depositors and borrowers, Monaghan and McGrane said, echoing a now-common refrain from community bankers around the state.
Mercantile, a bank of $150 million in assets, can now measure the concrete fallout from the big-bank blowups: it’s on track to grow by 25 percent this year, with a first-quarter increase of 11 percent in the bank’s annual lending rate.
It’s not that Mercantile has loosened its lending standards, McGrane said, it’s that larger banks are “turning off their loan spigot” and turning more borrowers away. Those borrowers are going to community banks instead.
Mercantile is not alone – 2008 annual figures are in for a number of community banks, both retail and commercial, and things are looking up.
“I’ve been talking to bankers in most of New England, and almost all of them have indicated deposit increases,” said John Pettazzoni, vice president for the Independent Community Banker of America’s Northeast regional office, who ticked off a handful of examples from banks around Massachusetts.
Retail banks have recently touted a major increase in deposit growth; Needham Bank, for its part, just announced a 33-percent increase in deposits and a 34-percent increase in lending for 2008, said bank President Jack McGeorge.
“Disillusioned consumers continue to seek out strong community banks,” he said, quoting from his own annual report.
Newburyport Five Cent Savings bank had a bang-up first quarter for deposits, with an $18.7-million increase in deposits for the three-month period – that’s compared to $21 million in deposit growth for the whole of 2008, said President Richard Eaton, who added the bank hadn’t made any major changes to its rates to help drive those deposits up.
Eaton attributed the increases more to the turbulent investment markets in general, rather than the big banks’ troubles in particular.
“People are just afraid of the market right now,” he said. “They’re looking for safety.”
Although Mercantile is a largely commercial bank, it also reported a jump in deposits. Most of the increase actually comes from existing customers, Monaghan said – most depositors are commercial outfits that had previously spread their deposits among multiple banks, but are now consolidating more cash under Mercantile’s roof.
Deposit growth was 2.5 percent for the first quarter, he said, and was more than 10 percent in 2008. That’s not extraordinary growth, but it’s enough to satisfy Monaghan.
If community banks wanted, many could probably grow by leaps and bounds, he said: they could drive up deposits by offering better certificate of deposit rates, or decide to aggressively increase lending. But at the moment, a conservative approach seems to be the plan.
Would-be borrowers may be asking for multi-million dollar loans, McGrane said, but the bank has preferred to stick to what it knows best.
“We’re still being very, very selective,” he said.
