Mark Welch started as his bank’s first mortgage loan officer in 1975, and has two chief memories from his first day on the job. First, there was free soda downstairs. Second, when he walked out of his office at around 2 p.m., he was shocked to see that everyone else had closed up shop and left him behind: “What the hell?” he laughs, recalling. “They forgot the new guy. The tellers were gone, the doors were closed.”
At hours from 9 a.m. to 2 p.m. five days a week, it was like a part-time job back in those days, he says. Banking was a sleepy business, but it certainly isn’t any longer.
As he prepares for his impending retirement in the summer of 2010, the Institution for Savings’ CEO shares his thoughts on what small banks have to do to survive today.
Mark Welch
Title: CEO, Institution for Savings, Newburyport
Age: 59
Experience: 34 years
The first wave of subprime mortgages bypassed a lot of community banks here in New England, but now they might have to deal with fallout from unemployment, where previously good borrowers just can’t make payments anymore. Can banks do anything to dodge that bullet?
No. You certainly stop some of your more aggressive loan products. … you get more conservative with your credit standards, with your affordability standards, with your loan-to-value standards… You’re excluding certain property types: you exclude second homes, you exclude condos. There are any number of things you can do that begin to sort of prepare you for a bad time. But you can’t avoid it, and depending on its severity, you can’t prepare for it.
I also hear a lot of talk about how it’s just plain getting more expensive to run a bank – increased costs of technology and compliance, for example. How can banks deal with those problems?
We’re going to be losing a lot of banks in the years ahead, and we’re going to lose them for a lot of reasons but one of those reasons is management boards aren’t fully committed, really, to being efficient and making the difficult decisions relating to personnel that sometimes need to be made.
That’s a hard thing for community banks that like to think of themselves as a family-type atmosphere.
You’ve got to be friendly, you’ve to engage your customers, but if you engage them with inferior talent, or with inferior products or with inferior service, you’re not going to make it. You can’t make it just because you’re friendly. You’ve got to make it because you’re good.
There will probably be more mergers and acquisitions in the years ahead, then?
It’s going to be impossible, literally impossible for banks under a certain size level to survive. I think $50 million or less is going to be difficult. Compliance costs, data processing costs, reduced, competitive disadvantages, Internet banking costs…
Not every bank under $250 [million] is going to fail or merge or whatever, but it’s going to be very, very difficult for banks under $250 million to be viable forever.
Top Five career accomplishments:
1.) Engineered a merger between his bank and Ipswich Co-Operative Bank, creating an institution of $800 million in assets
2.) Opened a branch in Salisbury Square – the bank’s first outside Newburyport
3.) Introduced commercial lending offerings
4.) Debuted 1820 Investment Services, which offers retirement and college savings plans, among other things
5.) Continued the bank’s charitable operations, such as local scholarships
