The Fast 50, compiled from data collected by The Warren Group, reveals the 50 fastest-growing lenders in Massachusetts. iStock illustration

While the state’s regional banks face liquidity pressures and have tightened their credit standards so far this year, Massachusetts’ smaller credit unions and mutual banks saw skyrocketing growth in commercial loan volumes in the first six months of the year. 

Appetite for commercial lending continues to be healthy in Massachusetts, said Bryan Regele, vice president of commercial lending at Webster First Federal Credit Union, given the active life science and tech sectors driving economic growth in the state. 

The Fast 50, compiled from data collected by The Warren Group, publisher of Banker & Tradesman, reveals the 50 fastest-growing lenders in Massachusetts for the first six months of the year, compared to the same period a year ago. 

This year’s analysis ranked Abington Bank and bankESB, both part of $4.5 billion-asset Hometown Financial Group, and Webster First as third, fourth, and fifth fastest-growing commercial real estate lenders in the first half of 2023, respectively. 

Which banks, credit unions and non-bank lenders made B&T’s list of the fastest-growing residential and commercial lenders? See our rankings.

Multifamily Beats Out Office 

The $1.4 billion-asset Abington Bank saw a 659 percent jump in CRE loan volume, amounting to $26.84 million in the first half of 2023 versus $3.54 million the same time last year. The $1.7 billion-asset bankESB also experienced a 385 percent acceleration, registering $87.4 million in commercial loans in the first six months of 2023 from the $18.02 million the same period in 2022. 

Hometown Financial Group CEO Matthew Sosik said bankers at both Abington Bank and bankESB were successful in putting long-term customer relationships to work and had not focused on transactional accounts, while Abington Bank also benefitted from talent acquired when it purchased Envision Bank, which helped drove more loans into the group. 

As the state’s largest banks tightened lending standards or reduced their lending, smaller banks and credit unions found paths to rapid lending growth. iStock illustration

Despite the dampened commercial office space due to remote work setups, Sosik said, CRE lending remains afloat due to the bright prospects in multifamily investment properties catered to the biotech sector. 

“The remote work paradigm from the pandemic jolted the office sector very quickly, which drove demand down. An example is if you have 50,000-square-foot of office space and heading into the pandemic, you now need only 10,000 square feet, and that’s 40,000-square-foot gap that will automatically go on the market,” Sosik said. “But on the bright side…We’re seeing long-term owners say, ‘OK, we’re not going to fight this new shift and we’re going to repurpose our space and resources for the next decade.’” 

Regele, of Webster First, said the credit union also saw good demand for its commercial real estate loans. Warren Group data shows Webster First commercial loans jumped by 362 percent to $30.8 million in the first half of the year compared to $6.67 million in the six-month period the previous year. 

“There’re still opportunities for commercial lending in regards to development projects and purchases. Refinancing opportunities have certainly gone down due to the function of the interest rate market today…but a lot of the opportunities has to do with the strides that this state has made in creating high-paying jobs in biotech and tech-heavy sectors,” Regele said. 

“Commercial lending is less sensitive to interest rates compared to residential consumer lending. With residential and consumer lending, [borrowers] may delay moving or purchasing a new car based on the interest rates. Whereas in commercial lending, if the project or the purchase still makes sense from a dollar-and-cents standpoint right there, [the borrower] is still going to make money even though the rate is higher. They will still go forward with the purchase,” he added. 

CUs Found an Opening 

Regele noted that his and other credit unions were well-positioned to capitalize on the current demand for commercial loans as bigger banks slowed their lending due to liquidity concerns and higher funding costs. 

According to the Warren Group data, Webster First doubled the number commercial loans it made in the first half of 2023, from nine to 18, making it the sixth-fastest-growing lender in this category in the state. 

Webster First was efficient in its networking and conversion of prospects to loans. Being member-focused, Webster First has always approached each member’s situation in a unique and personalized way, according to the member’s specific needs, Regele said. 

“We have a network of centers of influence that will refer people to us, and a lot [of our customers] were referred through word of mouth. They eventually see how easy we are to do business with, from cradle to closing. We are high-touch, very responsive, very communicative and that really goes a long way in today’s market, especially when a lot of the large regional [banks and credit unions] are kind of pulling back due to liquidity issues that they’re faced with,” he said. 

A majority of Webster First’s commercial loan portfolio is composed of investment properties such as apartment buildings . 

Webster First is one of the larger credit unions in Massachusetts with $1.2 billion in assets and broad customer reach with 14 branches in four counties: Worcester, Suffolk, Middlesex, and Essex. 

Nika Cataldo

Rates to Pressure Lending in ’24 

Heading towards the end of the year until 2024, Hometown Financial’s Sosik foresees interest rates will “stay higher for longer,” which he expects to put more stress on CRE lending and markets. 

“We expect stress in the commercial real estate markets essentially because of rates staying higher for longer, and because valuations in CRE are driven by rates of return,” the Hometown Group CEO said. 

“If the rate of return required by the investor rises, the price falls. That’s a risk if you’re a lender and CRE pricing is potentially going to be stressed, if it’s not already being stressed to a point. But we think that if rates stay higher for longer, that stress increases and so we’re just going to watch the light on that and how that relates to our ability not just to generate new loans into 2024, but also managing the portfolio,” he added. 

Sosik said that the acceleration in headline interest rates resulted in industry-wide outstanding loan rate hovering around 7 percent.