Capital Gains

It’s a story increasingly — and enthusiastically — being told by community banks in the Pioneer Valley. Simply put, while many large, national institutions have become trapped in a credit crisis partly of their own making, Western Mass. banks are well-capitalized and ready to do business. Westfield Bank is no exception, finding new avenues for growth by staying true to its core goals — among them steady and strategic expansion, a continued focus on commercial lending, and service that, as President James Hagan says, takes the bank to the customers.

Westfield Bank, with 11 branches and a steady growth pattern over the past few years, has consistently been one of the region’s positive financial stories — but the opening of a new location is still reason to celebrate.

Especially, bank President James Hagan said, when that new branch is a reflection of the institution’s success in a specific market.

That market is Agawam, where Westfield Bank has seen a swell of retail and commercial business in recent years, which is why a branch will open on Route 57 in Feeding Hills in June.

“Our Agawam branch is at full capacity, and we want to maintain and improve our service in that market,” said Hagan. “We own this land — we bought it decades ago — and we felt this was the right opportunity. It’s a high-visibility area, and we’ll run it similar to the Main Street branch, which is our second-busiest office.”

Alice Babcock, vice president and director of community banking, said the current Agawam branch is one of the company’s oldest, and has long had strong market share. “But the changes in the community have been such that the branch is bursting at the seams. And we’ve found that 30% of those who use the Main Street branch have Feeding Hills zip codes.”

In addition, the bank has several business customers in the Agawam Industrial Park, and the Feeding Hills branch will provide a more convenient site for them as well, she said.

Making business easier for commercial clients, in fact, is a long-time priority for the bank, as evidenced by the rollout of its remote data capture service a few years ago.

Westfield was the first community bank in the region to introduce the technology, which is essentially a device that scans checks at a customer’s place of business and allows him to make deposits remotely, even hours after most branches close. Babcock said the service has been a hit with customers, particularly those in towns without a branch nearby — especially critical when making inroads into Connecticut — and has been a selling point when attracting new commercial business.

That’s important for a bank that has not branched out as quickly or aggressively over the past decade as other regional institutions, instead opting for gradual, deliberate growth in its footprint, and always with a strategy.

Three years ago, that meant moving its downtown Springfield office to Tower Square to increase foot traffic, as well as opening a branch on East Main Street in Westfield with more space and visibility than its longtime Elm Street headquarters. That branch also boasts Sunday hours for customers too busy during the week to do their banking in person. And Saturdays and Sundays, it turns out, are that site’s busiest days.

These advances — strategic new branches, weekend hours, new technology to make business easier — all fit a pattern, said Hagan, of bringing the bank to the customer. And in these trying times for financial institutions, that sort of strategy is more important than ever.

Growth Pattern

Westfield Bank has undeniably been in a growth mode. From its launch more than 150 years ago through the mid-1970s, its assets had grown to about $100 million, but three decades of rapid expansion have brought that total to $1.1 billion.

In fact, total assets increased by $70.5 million last year alone, and net loans jumped by $59.1 million to $414.9 between the start of 2008 and the beginning of 2009 — primarily due to an expansion in commercial, industrial, and commercial real-estate loans, offsetting a slight decrease in residential mortgages.

“We’ve had great success growing our commercial and industrial loans,” which now total $245 million, Hagen said. More important, business in that sector is up 17% over last year, and up 24% in commercial real-estate loans.

At the height of this growth, Westfield Bank has also seen a shift in its administrative structure, with Don Williams, who handed the president’s reins to Hagan four years ago, recently stepping down as CEO, giving Hagan that role as well.

“It gives me a more global perspective,” Hagan said. “Before, it was more day-to-day, new product development, new sales development. Now it’s general management of the bank, how we utilize capital. And we have an awful lot of capital right now. In fact, we’re the third-most well-capitalized bank based in Massachusetts, with about $300 million.”

The Feeding Hills branch is one way that money is being put to use, but so is growth in the bank’s commercial-loan portfolio, which — rather than being hurt by the recent troubles of lending institutions nationwide — has been able to benefit from the crisis in at least one way, Babcock said.

“While the national banks are tending to hold back on new lending commitments to companies, Westfield Bank is still willing to entertain lending requests, and putting new business on the books,” she noted.

“Primarily,” Hagan added, “we’re picking up loans that are now in turmoil at larger national and super-national institutions, those that have had difficulty in either extending credit or adding to their current debt load. But these are well-known, Western Mass.-based companies, and they’re having a positive effect on our balance sheet.

“This didn’t just happen over the past year. It’s been a consistent marketing effort,” he added, noting that the bank has been in contact with some of these companies for a long time. “With some of the bigger accounts $5 million and up, it could take four to five years of consistent calling to finally get the account moved to your institution.”

And the marketing message goes well beyond financial numbers, he added.

“It’s a relationship. People want to know who you are and what your bank is about,” Hagan said. “They want stability, with a large capital base, a strong credit staff, and an excellent branch network. And we’ve been able to position ourselves as that bank and take advantage of other institutions’ problems.”

It’s not just loans; Westfield Bank has seen commercial checking accounts grow by 10% over last year, in addition to 8% growth in retail checking and 35% in consumer savings accounts.

“We haven’t had to put the brakes on at all,” Hagan said. “Lending is healthy, delinquency is low, and we’ve been able to position ourselves as an alternative to the national and regional banks.”

Community Minded

This success speaks, at least in part, to the bank’s growing reputation as a community-minded institution, said Babcock. “What we’re seeing on the consumer and business sides,” she noted, “is that customers are looking for a banker they know and can contact easily if they’re having questions.”

In addition, Hagan said, Westfield Bank continues to take pride in its Future Fund, a vehicle through which it has given about $1 million over the past three years to various charities and nonprofits, particularly those that focus on children and education — hence the word ‘future.’ A Web site has been set up not only to track where the money goes, but also publicize events that benefit those organizations, and hopefully spur more community giving.

The bank is on track to add another $350,000 in donations in 2009, he said, putting it right on track with the past few years. “This is a challenging time for nonprofits,” Babcock said, “and to keep the same level of commitment, we feel good about that.”

Even in the midst of a full-blown national financial crisis, it seems, there’s still good news coming out of Westfield.

“We don’t get the big highs and lows in this region, and our portfolio reflects that,” Hagan said. “Some sectors have dropped, like manufacturing, but other areas are looking pretty good.

“The economy isn’t robust,” he admitted, “but we’ve seen positive signs.”

Joseph Bednar can be reached at

[email protected]