In general, community bankers view the Massachusetts market as favorable, although it is clear that those closer to major cities in the market are doing much better than those in rural areas or Gateway Cities.
Those were the main findings in Massachusetts from a survey conducted earlier this year by the Federal Reserve and the Conference of State Bank Supervisors on community banking in the 21st century.
The survey was distributed by state banking regulatory agencies in April and remained open through July. The final sample consisted of 611 responses from community banks in 37 states.
Massachusetts bankers report that diversified, local banking markets in the state remain strong, particularly in areas within commuting proximity to Boston. In these areas, growth in housing and a large talent pool have driven growth in property values, which has spurred an increase in residential mortgage products and commercial real estate lending.
While community banks in rural areas and gateway cities are experiencing growth, there is not as much opportunity and they are facing increased competition from other community banks and online entities.
Banks in Massachusetts continue to protest the tax benefit credit unions get, and lobby “to level the playing field.”
Online banking has allowed banks to extend their geographic reach on loans, but this has increased bank competition from outside the locale of a given small community bank, which bankers think has the potential to distort assessment areas under the Community Reinvestment Act.
Bankers are concerned about not receiving adequate CRA credit for loans they buy in their area, as well as for those they originate but then sell.
Uncertainty with respect to revisions to laws and regulations continues to concern bankers, but they also say revisions and updates to the state’s regulations have led to a streamlined regulatory environment for businesses.
In terms of small business lending, community banks face increasing competition from credit unions and online companies, although many commercial customers remain with the banks because of the personal service they receive.
In rural areas of the state, banks say they are not as able to lend on a profitable basis to some small, cash-based commercial customers, which is tightening the market.
Commercial Real Estate loans remain a lower risk for most banks, but there has been an increased scrutiny of appraisals, particularly on speculative development.
Acquiring and developing talented staff is a priority for community banks in Massachusetts; bankers in rural areas are feeling the effects of a tightened labor force, as more educated people tend to move closer to cities.
These bankers find that a lack of relevant education in their communities restricts their bank’s ability to hire qualified staff, and they are always looking for recruits who are bilingual and can respond to cultural differences in the population.
IT is viewed as an opportunity, allowing small banks to broaden their geographic base and provide products to customers who may never enter a branch, but community bankers say it has not changed how banks do business in areas such as underwriting and customer service.
Larger community banks have developed in-house IT departments to develop their online presence and contain cybersecurity risk. Collaboration with other banks has been discussed, with some banks engaging in these partnerships and others not because of compliance and security concerns.
