Five years ago, community banks like Leader Bank, Cape Cod Five Cents Savings Bank and Lowell Cooperative Bank may have been flying under the radar in terms of the sheer dollar volume of Bay State residential loans. But the times, they are a-changin’. The financial crisis, for one, and the subsequent image problem that banks – big banks, especially – suffered in its wake, and the exodus of customers and loan officers from larger institutions to smaller ones, all appear to have played a role in changing the tide.
According to data recently released by The Warren Group, publisher of Banker & Tradesman, four Massachusetts community banks have edged their way into the top 10 residential lenders in the Bay State over the past five years. The data ranks institutions by market share of dollar volume for all loan types, both new purchases and refinances from January through November of last year.
As in 2007, banks last year still controlled the lion’s share of total dollars in residential lending – 52 percent in the first 11 months of 2012 compared with 53 percent five years ago – but Leader Bank, Cape Cod Five Cents Savings Bank, Berkshire Bank and Lowell Cooperative Bank, all took spots among the top 10, alongside giants like Wells Fargo, Bank of America and Citizens Bank.
Back in 2007, Bank of America was the number one residential lender, controlling just over a quarter of all the residential lending dollars banks loaned, but it’s since fallen to third place on the list, after Wells Fargo and Citizens Bank, and can only lay claim to 6.4 percent of those dollars, possibly due to Bank of America having unloaded CountryWide.
The top lender last year, Wells Fargo, took just 8.6 percent of those dollars. Citizens Bank trailed slightly behind them with 7.7 percent, and Sovereign Bank essentially tied with Bank of America.
Keys To Success
According to The Warren Group’s data, Leader Bank made 1,249 loans, refinanced 4,799 mortgages and claimed just a little more than 5 percent of the total volume of residential lending dollars in January through November 2012.
Jay Tuli, Leader Bank’s vice president of retail banking and corporate development, attributed the increase over the last five years to internal growth in the bank’s residential lending department.
“From 2008 to 2009, much of our growth was a result of recruiting new loan officers. From 2009 to 2012, all of that has been organic growth,” he explained.
Big banks experiencing credit problems and other internal issues have been shifting their focus and intentionally decreasing their market share in mortgage lending, Tuli said. Consequently, operations suffer and turnaround time on a mortgage increases, frustrating customers and eventually loan officers.
“This is really key,” he said. “If they’re taking longer to close a loan than their competitors, customers won’t want to go with them. After that happens enough times, their loan officers will not want to stay with them anymore.”
Lowell Cooperative Bank Chairman and CEO Richard Bolton generally agreed with that, but added that much of Lowell Bank’s growth was due to the bank’s acquisition of Sudbury-based Omega Mortgage two years ago.
The borrowers’ demographics haven’t changed, Tuli said. Leader Bank has consistently focused on marketing to younger couples and first-time homebuyers and has developed relationships with local realtors to help achieve those ends. And Massachusetts has not been hit as hard by the recession as other states.
Bolton added that the financial crisis of 2009 shook many weaker borrowers out of the marketplace and those left who are looking to buy or refinance generally have stronger credit and FICO scores.
While Leader Bank did a far greater number of refinances than new loans in 2012, that’s probably to be expected in a low-interest environment, and that held true across the board. Among banks, there were 127,785 refinances compared with 23,924 new mortgages in Massachusetts in the first 11 months of last year. Across all lending institutions, there were 30,735 refinances and 6,326 new mortgages from January through November 2012.
“I would guess that for other community banks, it’s their ability to attract loan officers that has moved them up the rankings. Everyone’s volumes have probably gone up, but the reason some banks have moved up in market share is due to their ability to attract loan officers,” Tuli said. “As a smaller bank, you can sometimes be more nimble than a larger organization can.”
Email: lalix@thewarrengroup.com
