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The Federal Reserve ended 2022 raising its benchmark rate seven times, making more – and larger – increases than analysts had forecast at the start of the year.
While the Massachusetts banking and lending industries had entered 2022 expecting to feel effects from inflation and potentially higher interest rates, the rapid changes to economic conditions came without warning.
The Federal Reserve ended 2022 raising its benchmark rate seven times, making more – and larger – increases than analysts had forecast at the start of the year.
With a two-year period of historically low mortgage rates over, the mortgage refinance boom ended as well. The average rates on a 30-year fixed-rate loan would eventually more than double, even rising above 7 percent for a time.
While rising rates meant some prospective borrowers no longer qualified for a mortgage, loan originators still reported a strong purchase market in 2022, with adjustable-rate mortgages gaining some traction during the year.
Commercial lenders also recorded strong demand for debt, with some lenders reporting a push to get deals done before rates went any higher. Since higher rates on deposits trailed the increase to lending rates, lenders even saw margin pressure ease for a time.
Eastern Exits Cannabis
When Eastern Bank announced plans in April 2021 to acquire Century Bank, Eastern Bank Chairman and CEO Bob Rivers had said the bank was excited to learn about Century’s cannabis banking business. Less than a year later, and now the largest Massachusetts-based bank, Eastern decided to shed the operation.
“We have spent considerable time reviewing the cannabis banking operation and remain very impressed with how these businesses have been served,” Rivers said in January. “However, we have determined the business is not well-aligned with our approach to serving our business customers due to the special handling required with meeting the banking needs of cannabis-related businesses at this time.”
The bank instead transferred Century’s cannabis banking business, which included about $500 million in deposits, to Needham Bank. Needham Bank has since started offering loans to cannabis companies and expanded to a new location not far from Century’s former headquarters.
Mutual Acquisitions Restart
While 2021 had seen mergers and acquisitions involving some of the region’s larger stock banks, like Eastern Bank’s acquisition of Century Bank, mutual banks got active again with deals in 2022.
East Cambridge Savings Bank announced in February that it would acquire Woburn-based Patriot Community Bank, a private stock company.
Then in March, the publicly traded Envision Bank sold itself to Hometown Financial Group, a multi-bank mutual holding company, and merged into Abington Bank this fall.
William Parent, who became president and CEO of Envision Bank a few weeks into the pandemic, told Banker & Tradesman in April that evolving technology and changing customer experiences for both retail and business banking had made it tough for Envision to hold its ground in a competitive market.
“You need the resources to compete, to remain relevant in the marketplace,” Parent said. “We had worked very hard to be a relevant factor in the markets that we competed in, but I saw, quite frankly, a dynamic challenge to maintaining that relevance going forward.”
Gilda Nogueira, East Cambridge Savings Bank’s president and CEO, told Banker & Tradesman that while mergers are inevitable in the industry, combining institutions provides a way to strengthen community banking.
“What made this transaction a little bit more special was the fact that it’s strengthening the community bank model,” Nogueira said. “It’s not just an acquisition to grow the bank; it truly is to continue to provide what we value so much, which is mutuality, community banking and being able to strengthen that.”
Another mutual, Norwood Bank, acquired Foxboro Federal Savings in a transaction completed in early December.
While not planning to merge banks, Newburyport Bank and Haverhill-based Pentucket Bank announced a little over a week ago that their mutual holding companies would combine.
2022 didn’t beat out the previous year’s pace of bank M&A activity, but numerous banks and credit unions took the opportunity to tie up.
Stock Banks Make Moves
While not as active as in 2021, stocks banks did make some M&A deals. After recent years saw Cambridge Trust expand its market by acquiring Wellesley Bank and New Hampshire’s Optima Bank & Trust, the bank made another deal this year with North Andover-based Northmark Bank. The deal, which closed in October, gave Cambridge Trust branches in three communities north of Boston where it did not previously have locations.
Boston-based Brookline Bancorp, the parent company for Brookline Bank and Bank Rhode Island, looked outside New England to make an acquisition. The holding company in December received approval to acquire New York-based PSCB Bank and operate it as a third subsidiary bank.
The year also saw two mutual banks partially or fully convert to stock banks. In January, Colonial Federal Savings Bank completed a first-step conversion that saw 42 percent of its stock start trading on the Nasdaq Stock Market. The Quincy-based bank raised $28 million in its initial public offering.
After bringing on former East Boston Savings Bank and Century Bank executives, Everett Bank announced in March it would go fully public, completing its IPO in July and raising $89 million in the process.
CUs Consolidate
While Massachusetts still has close to 140 credit unions, 2022 saw the state’s industry shrink, with at least eight smaller credit unions merging into larger institutions.
Comprehensive credit union legislation enacted in early 2021 has made merging federal and state credit unions easier. That will help two of the state’s larger credit unions – Lawrence-based Merrimack Valley Credit Union and Waltham-based RTN Federal Credit Union – which announced in December plans to merge in 2023, creating an institution with more than $2 billion in assets.
Mortgage companies also made some deals. After acquiring North Andover-based brokerage Superior Rate Mortgage of New England, South Carolina-based Movement Mortgage then acquired Danvers-based lender Mortgage Network.
Diane McLaughlin
Fewer Fees
Banks have faced growing criticism from the Consumer Financial Protection Bureau, consumer advocates and lawmakers over the effects of overdraft fees on low- and moderate-income consumers.
National banks like Capital One and Citibank eliminated overdraft and insufficient funds this year, and other national and regional banks have taken steps to help customers avoid fees without completely eliminating them.
In April, Hyannis-based Cape Cod 5 said it would eliminate all fees for consumer and business overdrafts, as well as nonsufficient funds.
“As a community bank, Cape Cod 5 works every day to help individuals and families reach their financial goals wherever they may be on their financial journey,” Dorothy Savarese, chair and then-CEO of Cape Cod 5, said at the time. “The elimination of all fees associated with overdrafts aligns with the bank’s values and demonstrates another way that Cape Cod 5 is leading the way in meeting the financial needs and supporting our customers and community members.”
