Hampden Bank Continues Its Growth Pattern
Last year was a rough one for financial institutions everywhere, but a good one for Hampden Bank, which was well-capitalized following its conversion to a publicly traded company in 2007 and, like most local banks, free of the toxic loans weighing down the industry on the national level. After turning a slight profit in 2008 (no small feat), the bank continues to thrive, looking for further growth opportunities and further ways to brighten each customers day.
As part of its current marketing campaign, Hampden Bank says it wants to brighten each customers day. Thomas Burtons day is brightened just by thinking about the timing of its transformation to a publicly traded company in 2007.
Obviously, our timing was very good, said Burton, the banks president and CEO. When we first decided to go public, in late 2005, we were at a point where we needed capital to continue to grow the bank and we raised a lot of capital, more than we really needed. In fact, the first initial public offering in 2007 netted about $50 million.
So we ended up with a lot of capital going into a period of time, last year, when the capital markets essentially collapsed, and you couldnt get capital if you wanted to, he continued. We were very fortunate that we continued to grow, and we went through this difficult time in very, very good shape. We actually made a small profit last year.
Hampden Bank has more than weathered the storm; well-capitalized and free of the toxic assets that have cripped many national banks, the institution saw its deposit accounts grow tremendously last year, and commercial loan volume increase by 8% a remarkable figure at a time when the recession has dissuaded many companies from expanding and making capital investments.
I have satellite radio in my car, and I hear these national ads from loan brokers saying that banks arent lending, Burton told BusinessWest. Well, weve been lending. Our underwriting standards havent changed, and 8% growth is a good year when there hasnt been a lot of economic expansion. I think its unrealistic for people to think they cant get a loan in this day and age; certainly weve been lending on a consistent basis.
In this issue, BusinessWest examines why, at an uncertain time for the economy as a whole and especially financial services, Hampden Banks future is looking bright.
In rocky financial times, people gravitate toward local institutions they trust, said Rick DeBonis, senior vice president of marketing at Hampden Bank. While any bank can bring in money by raising CD rates, he explained, Hampden significantly raised its core deposits over the past year because people felt like thats where their money should be.
This past year, we saw one of our largest deposit growth years ever, Burton said. Theres been a flight to safety, with taking money out of the markets and going back to their local banks, and we benefited from this. We need the deposits to continue to grow.
It was a remarkable year, and that came from a cross-section of checking accounts, money markets, and some CDs, added DeBonis. We employ what is called a surge marketing technique and focus on a two- to three-mile radius around each branch, and that seems to be working well for us. Of course, youve got to have the right products, too.
Burton said the banks marketing efforts have focused on Hampdens position as a local, community bank, where you have access to real people, where you can call in during business hours and not get an answering machine, but get a real person. My office is right off the lobby, and I certainly expect to see customers and, believe me, they dont hesitate to drop in.
But that community emphasis extends beyond mere courtesies and carries a tangible economic benefit for Greater Springfield, he explained.
Its what we call our circle of prosperity, he told BusinessWest. Were getting these local deposits, and they are lent back into the community whereas, if you put your money into a national bank headquartered somewhere else, like Charlotte, or Canada, those deposits may or may not stay local.
We say that deposits made here go to work here, which is an important distinction, DeBonis said. Also, an important focus of our advertising starting last year has been to use Tom as the key spokesperson. We feel thats important in this environment, that peole want to know the president of the bank, that hes accessible to them. Hes always had an open-door policy, and that gives people an added measure of comfort and peace of mind, knowing the president of the bank is right here, addressing their issues.
One of those issues, Burton said, is simple customer anxiety specifically, the fear last fall that their deposits werent safe as bank failures dominated the news. Like other area institutions that remained essentially healthy (in large part because they had not abandoned basic underwriting standards to take on risky loans), Hampden Bank was proactive in getting the word out that, between the Federal Deposit Insurance Corp. increasing coverage from $100,000 to $250,000 of each bank account and Massachusetts guaranteeing the rest, peoples money was safe.
Then theres the banks marketing slogan of the past year: How can we brighten your day?
Our people answer the phone that way, and they mean it, DeBonis said. Its not just a slogan, but something were trying to live, whether that means easing someone through the mortgage process or helping someone to their car with an umbrella when its raining. Its going above and beyond and brightening a customers day.
Burton said customers want that kind of treatment given the economic turmoil of the past year. Its been the worst of times and the best of times, he noted. Weve done well capturing new customers, especially from the larger banks, and that has allowed the bank to continue to grow. Word of mouth is the best advertising, and not a week goes by when I dont get a letter from someone who had a pleasant experience doing business here. Thats encouraging, that people would take the time to write about their experience. It makes my day when that occurs.
Burton said Hampden Bank has been growing by about a branch a year on average; its latest addition, on Shaker Road in Longmeadow, is that towns second branch, but one thats more accessible to residents of East Longmeadow as well as Suffield and Enfield, Conn., giving Hampden a foothold across the border.
We look for opportunities where we see weaknesses in the industry, he said. Were always looking for opportunities to grow the bank, both geographically and in lines of business, and we have our eyes open and ears to the ground. Right now, coming out of a recession, is the best time to expand and make moves.
The banks online presence has also seen consistent growth, Burton said. People recogize it as a convenience, and it becomes part of their life. You can pay bills and transfer funds wherever you have a computer and Internet. Look at me I work a few feet from the tellers, and I rarely go there.
He doesnt expect online banking to replace physical branches any time soon, though, or even reduce the need for them very much. People go to the bank for a variety of reasons to transact business, yes, but for some its a social experience. People are always welcome here, and theyre welcome online; were glad to have all these channels open to our customers.
Those efforts to brighten peoples day, wherever they choose to conduct business, is paying off, Burton said, as evidenced by the influx of new business as well as a high percentage of customers who have been with Hampden Bank for at least a decade.
Our focus now is on continuing to grow and leverage the capital we have, while making sure we dont make any mistakes in the process, Burton said. Weve seen that happen to too many banks that went from mutuality to stock ownership in the late 80s, and we dont want to make the same mistakes some of those made.
That means seeking out growth opportunities slowly and deliberately and reaping the rewards of greater lending power the bank can make commercial loans up to $10 million but also refusing to compromise its underwriting standards to make a quick buck.
We had one foreclosure this year a condo that wasnt even inhabited and have another one in process, and thats the extent of our foreclosures, he said. Theres two reasons for that. One, we correctly underwrote the loans in the first place, and two, those customers who have had financial problems or lost their job, we try to work with them to modify their loans to make them affordable or at least help them through the temporary difficulties in their household income.
It all goes back to developing lasting connections with the people to come through the front door seeking financial assistance.
Were not transaction-oriented; were relationship-oriented, Burton said. We dont just care about giving you a mortgage; we want customers to be with us for a long time, for their deposits, car loans, investment services, whatever. Wed like to be their financial institution of choice.
Its a bright strategy one thats paying dividends even in uncertain economic times.
Joseph Bednar can be reached at