Down to Business
Westfield Bank Charts a Steady Growth Pattern
As banks across Western Mass. grapple with a host of new challenges — from reduced profit margins to a decrease in home-mortgage business — Westfield Bank continues to grow steadily by aggressively building its commercial loan products and by making itself more accessible to both business and retail customers. In doing so, this 153-year-old institution remains one of the region’s financial success stories.
James Hagan believes in identifying a niche and excelling in it. And, like his predecessor at the helm of Westfield Bank, he’s finding success by building on what works.
When Hagan took the reins from longtime bank President Donald Williams last year, he was already committed to the course that Williams had set: focusing on the bank’s commercial-lending business and not getting drawn into the branch boom that has seen other regional institutions extend their footprints into far-flung territories.
To be sure, Westfield Bank has seen success in its retail and home-mortgage business, and it is making strategic expansion moves as well — but none of it at the expense of local customers or a growing commercial-loan business that now boasts a backlog of more than $50 million, at a time when banks that rely more heavily on home mortgages might be feeling a bit squeezed.
“Our backlog is extremely high,” Hagan said of the commercial-loan business. “That doesn’t mean we’ll get all those accounts, but if we get even a good percentage, we’ll have a very successful 2007.”
He added that the regional economy might typically grow slowly, but he senses the kind of optimism from the area’s business community that bodes well for continued success in commercial banking.
In this issue, BusinessWest examines why the key players at Westfield Bank are hopeful for continued growth — both by offering the products that customers want, and by taking steps to make their lives a little bit easier.
In My Time of Banking
From Westfield Bank’s launch 153 years ago through the mid-1970s, its assets had grown to about $100 million, but three decades of rapid growth have brought that total to $832 million. The bank will also benefit from selling 9.9 million shares of stock in its ongoing conversion to a fully public company, a transaction approved on Dec. 18.
“That should certainly increase our capital and assets as we move forward into the new year,” Hagan said — in turn increasing the bank’s flexibility in making more and larger loans.
“We’ve continued our emphasis on the commercial lending aspect and actually made strides there,” Hagan said, noting that the bank has hired additional lenders to oversee its business-loan activities in Northern Conn., a new market for Westfield Bank.
One of them, William Fleming, “came to us with a venture capital background and added a world of experience,” Hagan said. “We’re very excited about going into Connecticut and opening up a tremendous new marketplace for us. And we’re doing it with what we call ‘desk to deposit.’”
Specifically, Westfield is the first community bank in the region to use a technology known as remote data capture.
“It’s a piece of equipment that scans checks at a customer’s place of business and allows us to deposit items to accounts here in Westfield,” said Alice Babcock, vice president and director of community banking. “What that means is, we don’t need a branch in Connecticut to support our lending efforts there. We can put one of these on the customer’s desk, and he can access Westfield Bank even though his office is far away.”
The bank, which has also introduced the technology to clients in Western Mass., is the first community bank in the region to use remote data capture, Babcock added, although the technology is commonly used by larger institutions.
“It has been met with remarkable success,” she said. “It allows our customers to do business without having to come to the branch, and it’s a window for customers to deposit checks up until 7 at night, instead of having to come to the bank by closing time at 4 or 5. It’s revolutionizing how businesses do their banking.”
“It has been a good way to get in the door with prospects,” especially those located away from the bank’s Western Mass. branches, Hagan said. And because time is money to business people, any development that makes customers’ lives easier benefits the bank, particularly in such a fiercely competitive market for commercial banking.
“The nice part for us is that it doesn’t limit our footprint to physical branches,” Babcock said. “We can support customers down there, which gives us more time to think through our strategy on bricks-and-mortar expansion.”
Not that Westfield Bank has been lax on that account. At a time when banks are branching out at unprecedented rates, Westfield hasn’t built many new branches, but is making a few key additions.
Take Tower Square in Springfield. In March 2006, the bank moved its downtown office to that location, from a building farther away on Main Street.
“We’re excited about what we’ve seen develop in that particular marketplace,” Hagan said. “Our assets have grown significantly in that branch since we moved. We’ve gained a lot of visibility and accessibility there.”
Babcock added that downtown Springfield continues to have a safety problem — or at least a perception of one — but people feel more secure banking at a commercial center like Tower Square.
“Plus, we wanted to make a commitment to the heart of Springfield, and that’s where Tower Square is,” Hagan said. “We feel very strongly about that.”
Positively East Main Street
A fourth branch in Westfield, set to open in April 2008, also speaks to an emphasis on making life easier for customers. Babcock said the bank’s current main branch on Elm Street lies close to the Great River Bridge, which will undergo a lengthy rebuilding project over the next few years.
“The main office is becoming less convenient for people; they’re concerned about the bridge,” she said. “So that was one of the main reasons we began looking for an alternate branch. The location on East Main Street (near the new Home Depot which opened earlier this year) is well-suited for us on that side of town. It really helps residents of that area who are used to coming here.”
“In the past 10 years, there have been 500 or 600 housing starts in the neighborhoods on that side of town,” Hagan said. “The time is right. We’ll have good visibility and accessibility there.”
To further emphasize the convenience factor, Westfield Bank will pilot a seven-day schedule at that branch, keeping office hours on Sundays as well as weekdays and Saturdays.
“Saturdays are over pretty quickly, what with children and sports and everything else,” Babcock said. “All the research we’ve done says that banks that open on Sundays have been very profitable. And customers appreciate not being stressed and having a little more time to get to the bank. It may become a model for us going forward.”
At the same time, Westfield Bank will announce another new branch opening in the coming months. Hagan would not reveal the location, but said it’s in a town where the institution does not currently have a presence.
That location, and the second Westfield site, would bring the bank’s branch total to 12. In addition, three new automated tellers were added in the past year — two in West Springfield and one in Westfield — bringing the bank’s total number of ATMs to 19, with the same growth rate planned for 2007.
In a competitive (some might say overbanked) market, banks need to be more accessible to customers in order to compete for their business, Hagan said. That’s especially true over the past couple of years, during which time financial institutions have found it increasingly difficult to harvest large profits, due to a phenomenon known as a flat yield curve.
Essentially, the yield curve is the difference between short-term and long-term interest rates on loans. In recent years, short-term rates have been significantly lower than long-term rates, which is beneficial for banks, because it allows them to borrow money on the short end and loan it long-term. However, the Federal Reserve has raised short-term rates over the past few years while long-term rates have remained steady, cutting into banks’ profit potential in the loan business.
However, the impact is felt especially in the arena of long-term mortgages, and Westfield Bank’s recent emphasis on its commercial loan business over the home-mortgage side insulates it somewhat from the full effects of a flat yield curve — not to mention a declining mortgage-loan market.
“Because we focus more on commercial lending, the residential downturn hasn’t impacted us as much as it has other banks,” Hagan said.
Gotta Serve Somebody
All banks, however, regardless of their focus or size, must deal with customers’ shifting preferences for how they want to do business. Westfield Bank has seen such strong response to its online banking, for instance, that the technology — along with greater use of ATMs — has forced the institution to adjust the roles of its branch staff.
“We’re seeing customers use alternate delivery channels for transactions, but you still need bricks and mortar for more complicated questions, financial counseling, that sort of thing,” Babcock said. To that end, the bank has trained and upgraded its branch staff to be more skilled at this kind of work.
Frankly, that shift away from conducting routine business in the branch doesn’t surprise Hagan, and it gives banks more flexibility to expand their customer base without necessarily expanding their physical footprint.
“You need to make things as convenient as possible for customers and prospects,” he said. “Typically, what’s happened is that the day-to-day transactions that used to be done at a physical branch are being done on computers. We’re seeing customers using internet banking products to a much greater degree.”
In short, said Hagan, there’s only one method of making a bank more accessible to 21st-century customers:
“You have to take the bank to them.”
Joe Bednar can be reached at[email protected]