Hartford Business Journal

12 Hartford Business Journal • October 15, 2018 • www.HartfordBusiness.com By Gregory Seay gseay@hartfordbusiness.com C onnecticut's smaller community and regional banks are gaining ground on their much larger, out- of-state competitors. According to the latest market-share report recently published by the Fed- eral Deposit Insurance Corp., five major money-center lenders with significant branch outposts in the state shed a combined $1.7 billion in deposits in Connecticut, and ceded market share from June 30, 2017 to June 30, 2018. While these deposit snapshots only reflect a specific point in time, this represents the first time in at least five years that so many big U.S. and international banks in the state shed deposits, which are a vital source of funds that lenders reinvest as con- sumer and commercial loans. Banks profit on the interest differ- ence on what they pay for deposits and earn from loans. New York's JPMorgan Chase Bank, America's No. 1 bank by assets, Cali- fornia's Wells Fargo Bank (No. 3), New York's Citibank (No. 4), Canada's TD Bank (No. 8), and Santander Bank, all shed Connecticut deposits and market share in the latest 12-month period, ac- cording to FDIC data. Citibank shed the most — $694 million in deposits, an 11 percent decline. On top of that, Wells Fargo and Citibank have seen their Connecticut deposits slide in each of the last two years, FDIC data show. Meantime, TD Bank and JPMorgan Chase steadily grew in-state deposits from 2014 to 2017, before experiencing declines in 2018. Santander Bank, the U.S. unit of Spain's Banco Santander, suffered deposit losses the past three years, data show. Santander Bank, through a spokes- woman, blamed its Connecticut deposit drop on the state withdraw- ing unspecified sums from it in 2017, based on the bank's "needs to im- prove" Community Reinvestment Act (CRA) rating for the 2011-13 assess- ment period. In 2018, Santander's CRA rating was upgraded to "satisfactory" for the 2014-2016 CRA exam period. Other deposit-losing banks did not respond to requests for comment. Simultaneously, North Carolina finan- cial giant Bank of America led Connecti- cut's Webster Bank and People's United Bank, and a raft of in-state community lenders, in gaining deposits and market share in the June-to-June period. Some bankers say the numbers rep- resent an aberration, while other indus- try experts say Connecticut's banking landscape is being turned on its ear as smaller regional and community banks leverage their customer relationships and technology to gain market share mostly at the expense of their much larger, out-of-state rivals. At the same time, the overall number of community banks in the state has significantly shrunk over the past decade, leaving only the strongest remaining banks to compete with bigger players. The deposit-share shakeup occurred amid what's been a very competitive banking landscape as lenders compete in a state with a shrinking population and slow economic growth, which makes finding new commercial and individual depositors and borrowers more challenging. The total pool of deposits in the state only rose 1.76 percent over the last year to $135.6 billion, the slowest growth rate seen since 2012, FDIC figures show. "The gap be- tween the large banks and smaller banks is clos- ing,'' said Donald Klepper-Smith, partner in Data- Core Partners in New Haven who until recently was Farming- ton Bank's chief economist. "If you were to pick one sector of the economy that's ultra-competitive, it would be banking. You need to bring your 'A' game to the table, with the best pos- sible people and array of services.'' Coveting relationships Chasing depositors is a key focus for banks and it's been driving merger and acquisition activity in the state, as some lenders buy deposits rather than try to grow them organically. Jeff Tengel, president of People's United Bank, acknowledged recently to HBJ that a prime reason his Bridgeport regional lender pursued its $544 million purchase of former Farmington Bank was to gain access to the community lender's deposit base, particularly in wealthy West Hartford. Deposit de- sires also drove Hartford's United Bank to acquire a handful of branches in east- ern Connecticut, Rhode Island and western Mas- sachusetts from Waterbury super- regional lender Webster Bank. United also plans new satellite bank offices in the Springfield region, former home to its predecessor, United Bank of West Springfield. It merged in 2014 with for- mer Rockville Bank in Vernon, to form the present United Bank. Of the top 10 banks based or operat- ing in Connecticut, United has had consistently strong deposit growth in recent years, FDIC data show. CEO William H.W. "Bill" Crawford IV says United's commercial deposits ben- efited from its headquarters move from suburban Glastonbury to downtown Hartford, placing it closer to existing Market-share Fight Competitive gap among CT's small, big banks narrowing Bank deposit market share leaders in CT* 2018 Bank 2018 Deposits 2017 Deposits % Change Market Share Bank of America $32.1B $30.4B 5.82% 23.7% Webster Bank $18.6B $17.8B 4.77% 13.71% People's United Bank $17.5B $17.2B 1.65% 12.87% Wells Fargo Bank $8.3B $8.8B -4.65% 6.16% TD Bank $6.7B $6.9B -3.73% 4.92% JPMorgan Chase Bank $5.8B $5.9B -2.17% 4.25% Citibank $5.6B $6.3B -11.02% 4.13% KeyBank $4.3B $4.2B 2.07% 3.18% United Bank $4.1B $3.7B 10.14% 2.99% Liberty Bank $3.6B $3.6B 1.29% 2.67% * As of June 30, 2018. Source: Federal Deposit Insurance Corp. Wells Fargo Bank was among a handful of large, U.S. money-center lenders whose Connecticut deposits and market share fell in the last year. PHOTO | CONTRIBUTED Donald Klepper- Smith, Economist, DataCore Partners William H.W. "Bill" Crawford IV, CEO, United Bank

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