In case you took it easy this summer, between the great weather and the high interest rates, here are the biggest Massachusetts banking stories you might have missed.
Eastern Bank, Cambridge Trust Finally Merge
The long-awaited tie-up, which vaulted Eastern into a comfortable spot as the biggest Boston-based bank operating in the region, had been delayed by a full quarter until July 12 as federal regulators took their time analyzing the deal – part of what observers say is an economy-wide trend of greater merger scrutiny by the Biden administration.
The wait proved beneficial for the two banks, though, as they lined up their prep work for a systems conversion and branch rebranding and pulled the trigger on both right after the merger was authorized. Since then, Eastern has been announcing several executive moves that are seeing leadership structures from both banks mesh.
Two New Mergers
First, Holyoke-based PeoplesBank announced it was merging mutual holding companies with the smaller, Spencer-based Cornerstone Bank. Then last month, Pittsfield Cooperative Bank announced it was acquiring Springfield’s Arrha Credit Union to create a $519 million-asset bank – a decision that’s elicited mixed reactions from industry leaders.
Rate Cut Finally Comes
To everyone’s relief – and some excitement – Federal Reserve Chair Jerome Powell finally confirmed the central bank’s intent to cut its benchmark interest rate this fall during a speech in Wyoming. But what impact that has on banks, credit unions and other borrowers remains to be seen.
CRE Lending Pullback
It’s not new that banks, under pressure from regulators to lower their concentrations of commercial real estate loans and trying to make more space on their balance sheets for loan loss reserves, have been making far fewer commercial real estate loans – assuming a developer has a project that can even pencil at today’s interest rates. But several local banks during second-quarter earnings calls noted that they would be making fewer loans to multifamily real estate projects, the biggest of them being Rhode Island-based Citizens which told analysts it was betting it could replace the lost interest with fee income from a wealth management business it’s been busy growing to compete with JPMorgan Chase and others.
Other Lending Types Growing
CRE lending may be down, but banks and credit unions are finding ways to grow volume elsewhere.
With the housing market still generally stuck in a rut and homeowners with increasing amounts of equity burning holes in their pockets, many local banks and credit unions are seeing big increases in demand for their home equity line of credit products. And among the state’s fastest growing lenders of 2024, one found prominent success by coming up with ways to help first-time buyers get into homes.
Adaptations to Commission Changes
Last month also marked the biggest change in the residential real estate market in a generation, as new rules governing how buyers’ agents get paid went into effect. Many have worried this will soften homebuyer demand, as in theory they’re now on the hook for their agent’s commission, unless they can get the seller to agree to pay, or otherwise lead to some kind of (still uncertain) market shifts.
But Arlington-based Leader Bank announced last month it had come up with a new use for an established HELOC product originally targeted at new buyers’ moving expenses and home renovations: letting buyers finance their agent’s commissions separate from the mortgage. The product is being offered only on a limited basis this fall, but could see a wider roll-out in time for the 2025 spring homebuying season.
Fraud on the Rise
Banks were also buffeted by fraud issues, and their political fallout. Members of Congress decided to turn the heat up on the bank-owned Zelle real-time payments network amid ongoing consumer complaints that participating lenders weren’t doing enough to tamp down on scammers. And new data came out showing that old-fashioned check fraud was up 20 percent year-over-year in July.
Global IT Outage
Ultimately, the mid-July global IT outage caused by cybersecurity firm Crowdstrike could have gone worse for Massachusetts banks – just look at Delta Airlines. But while it only caused intermittent service issues at some lenders, at least a few observers noted that it should be a “wake-up call” for banks about cybersecurity.
