Hartford Business Journal

8 Hartford Business Journal • December 9, 2019 • www.HartfordBusiness.com By Matt Pilon mpilon@hartfordbusiness.com W hen a lion kills and eats a gazelle, the apex predator sustains itself and grows stronger, but so too can clever hyenas and other hunter- scavengers down the food chain who hover nearby waiting for their opening to grab a piece. It turns out the natural pecking order of the Serengeti applies to Connecticut banking, too. Over the past year or so, as Bridgeport-based regional lender People's United Bank gobbled up Farmington Bank, smaller commu- nity lenders have circled, looking to take advantage of a long-dominant local brand suddenly disappearing from the market. Since the Farmington Bank deal closed in Oct. 2018, three lenders — Ion Bank, Thomaston Savings Bank and Collinsville Bank — have moved to establish their first-ever Farmington outposts, making the town one of the most active in the state for new branch activity. The move has already paid off for Ion Bank, which has attracted $42 million in deposits at its new Farm- ington branch, and poached more than a dozen Farmington Bank commercial lenders and other em- ployees who are expected to amass a nine-figure loan portfolio this year, said Ion CEO David Rotatori. "There's a lot of disruption when customers have to move accounts to a new bank," Rotatori said. "I think that's why people are looking at the Farmington area as a very good place to get a foothold into right now." It's not unusual to see such a wave of activity, said R. Michal Goman, principal of East Hartford- based Goman + York and president of Accubranch, which helps banks analyze potential branch locations. The acquisition of a longtime lo- cal bank by a larger player can be a driving factor for new branch open- ings, as lenders outside the market perceive a somewhat rare chance to expand into new turf without having to rely solely on winning a head-to-head dogfight for market share, Goman said. A branch can cost a few million dollars to open, and $1 million or so to operate annually, so banks will consider anything that can increase the chances their invest- ment will pay off. "You don't want to open one and do poorly," Goman said. Bank branches in Farmington hold more than $1 billion in depos- its, and the 167-year-old Farmington Bank owned about half of the mar- ket when People's United purchased it, according to federal data. So, if community banks seeking a growth opportunity think they can siphon off 10 to 15 percent of those deposits from Farmington Bank's reflagged, converted branches, they'll try. "If I'm a community bank, maybe I'll look at it and say 'there's my op- portunity,' " Goman said. Banking experts interviewed by HBJ said some customers may switch banks, even though it's a hassle, simply because they value doing business with smaller insti- tutions, which tend to have more direct community involvement in their territories than a large bank. But if that's not enough, changes to account terms and fees after an ac- quisition could motivate a switch. Research by Deloitte and J.D. Power concluded that mergers and acquisitions increase the chances of customers moving their accounts. Come and get it While larger banks often assume some amount of deposit shedding when they are weighing the merits of an acquisition, People's United CEO Jack Barnes said his bank isn't going to give up customers easily. The bank, which has honed its playbook through numerous acquisi- tions, works to limit deposit losses through steady communication with retail and commercial customers about changes and new offerings, as well as a focus on getting the tech- nology transfer right, Barnes said. That strategy, he said, has helped the bank retain 90 percent or more of acquired accounts in recent years as its gobbled up a number of lenders in and outside the state. "Competitors do get excited and they want to try to take advantage of disruption and change," Barnes said. "We do really well there and it's something we're proud of." Ion Bank was the first newcomer to challenge People's United's new Farmington stronghold, and it's paid off so far, Rotatori said. The Naugatuck-based mutual opened its 4 Main St. branch in January, a few months after the Farmington Bank acquisition closed, giving it a first-mover ad- vantage, Rotatori said. In its first six months, Ion's new branch built up $42 million in de- posits, far exceeding initial expec- tations of $25 million in year one. Ion's decision to poach former Farmington Bank talent, who are expected to build up $100 million in loan volume this year, provided a further boost. "It's been incredibly successful Deposit Poachers With sudden absence of a long-time community lender, Farmington sees wave of new bank competitors Ion Bank CEO David Rotatori is beaming about his decision to move quickly into the Farmington market, following People's United Bank's acquisition of Farmington Bank last year. It's been profitable so far, but other banks are following suit. HBJ PHOTO | STEVE LASCHEVER

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