Worcester Business Journal

wbjournal.com | September 28, 2020 | Worcester Business Journal 21 B A N K I N G & F I N A N C E F O C U S We're planning for the economy to worsen F L AS H P O L L Are you financially preparing for a worsened economic downturn? COMMENTS: Central Massachusetts banks, along with many nationwide, have begun setting aside funds to cover losses, as they project more borrowers will default on their loans or delay their loan payments. The move by the banks anticipates the economy is going to get worse. When polled online, more than two-thirds of WBJ readers said they are preparing for a further downturn in the economy. "Actually sort of ready. Depends upon how much worse." Yes. 70% No. 30% Central Mass. bank profits Despite rising profits, most banks based in Central Massachusetts have seen their net income fall in 2020. Bank First half of 2019 First half of 2020 Percent change bankHometown, Oxford $3,474 $4,015 16% Fidelity Bank, Fitchburg $3,134 $3,592 15% Webster Five Cents Savings Bank $3,099 $3,477 12% Bay State Savings Bank, Worcester $1,045 $1,098 5% Milford Federal $546 $543 -1% Savers Bank, Southbridge $1,785 $1,729 -3% Main Street Bank, Marlborough $2,838 $2,007 -29% Rollstone Bank & Trust, Fitchburg $1,919 $1,284 -33% MutualOne Bank, Framingham $8,149 $5,326 -35% Avidia Bank $5,703 $3,402 -40% Clinton Savings Bank $2,496 $1,384 -45% UniBank, Whitinsville $6,660 $3,249 -51% Middlesex Savings Bank, Natick $21,930 $7,519 -66% Cornerstone Bank, Southbridge $3,397 -$765 -123% Athol Savings Bank $1,168 -$844 -172% TOTAL $67,343 $37,016 -45% Note: Amounts are in thousands. Source: Federal Deposit Insurance Corporation Central Mass. bank deposits Deposits are up among the 15 largest Central Massachusetts-based banks during the first half of 2020. Bank First half of 2019 First half of 2020 Percent change bankHometown, Oxford $675,028 $1,014,511 50% Avidia Bank $1,348,591 $1,780,590 32% UniBank, Whitinsville $1,619,317 $2,029,319 25% Webster Five Cents Savings Bank $658,557 $775,737 18% Cornerstone Bank, Southbridge $878,565 $1,031,349 17% Middlesex Savings Bank, Natick $4,198,544 $4,849,279 15% Bay State Savings Bank, Worcester $348,673 $402,506 15% Savers Bank, Southbridge $422,125 $487,153 15% Athol Savings Bank $379,414 $426,161 12% Fidelity Bank, Fitchburg $862,863 $967,796 12% Rollstone Bank & Trust, Fitchburg $469,907 $522,038 11% Milford Federal $330,042 $363,234 10% Clinton Savings Bank $460,134 $504,336 10% Main Street Bank, Marlborough $862,788 $930,48 68% MutualOne Bank, Framingham $781,331 $756,062 -3% TOTAL $14,295,879 $16,840,557 18% ings shock. At Hudson-based Avidia Bank, net income is down 40%, but Mark O'Con- nell, the bank's president and CEO, said two diverging trends have somewhat offset one another: lower interest rates brought in less revenue but strong de- mand for refinancing home loans is up. e bank is also saving money, O'Con- nell said, by not having travel and other expenses it would normally incur if not for the pandemic. Expecting tougher times In the first half of the year, the largest Central Massachusetts-based banks set aside more than five times as much money on potential loan losses than they did a year prior. Nationally, it was nearly fourfold, from $12.8 billion to $49.1 billion. Even that local figure may not account for how much banks are setting aside. Cornerstone Bank, for example, had less money set aside for losses through the first half of 2020 than it did a year ago, but Tallman, the bank's president, said more has been put aside since. Tallman, who will take over as Cornerstone's CEO at the end of the year, said the bank is projected to set aside about $5 million for loss provisions this year, five times more than last year. Challenging banks during this time is the unprecedented nature of the downturn. at it's largely related to the pandemic means lessons from, say, the Great Recession, don't necessarily apply. Poor underwriting drove much of the 2008 recession, Skarin said, but today, loans would generally be just fine if not for the pandemic. Banks today are taking data available to them and making their best estimates for what their portfolios are going to look like, he said. "Obviously, there's no pandemic data out there," Skarin said. "I don't think there's any data from 1918 that a bank can run their data against what happened then." The 15 largest Central Massachusetts-based banks during the first half of 2020 set more money aside to cover potential losses from loan defaults. Bank First half of 2019 First half of 2020 Percent change Fidelity Bank, Fitchburg $336 $5,391 1,504% UniBank, Whitinsville $793 $4,400 455% Main Street Bank, Marlborough $540 $2,500 363% Athol Savings Bank $300 $435 45% Avidia Bank $1,725 $2,500 45% bankHometown, Oxford $300 $420 40% Webster Five Cents Savings Bank $485 $592 22% Milford Federal $38 $45 18% Middlesex Savings Bank, Natick $0 $4,000 N/A Rollstone Bank & Trust, Fitchburg $0 $600 N/A Clinton Savings Bank $180 $180 0% Savers Bank, Southbridge $265 $210 -21% Bay State Savings Bank, Worcester $171 $126 -26% Cornerstone Bank, Southbridge -$402 $4,009 -1097% MutualOne Bank, Framingham -$16 $539 -3469% TOTAL $4,715 $25,947 450% Preparing for loan losses W

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