Hartford Business Journal

May 3, 2021

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21 HARTFORDBUSINESS.COM | MAY 3, 2021 seeing customers coming to us because of that announcement." On her Fairfield County turf, Union Savings' Merkle has already been competing against People's United, Webster and M&T for years. She said she is excited about the opportunity to grab new customers, but also doesn't expect any of the larger banks to willingly cede business. "I think they're probably going to keep their feet on the ground out in Let us help get your people back to work! h t t p : //o f f e r. g o e n c o n . c o m / h b j 1 2 6 5 W o o d e n d R d , S t r a t f o r d , C T 0 6 6 1 5 | 2 0 3 - 6 8 3 - 4 9 9 8 The CDC states that a building's heating, ventilation & air system is the main way to fi ght indoor air contamination. Is your system up to the task? For over 50 years, we have helped to improve indoor air quality in businesses throughout Connecticut. We can help you too. Ion Bank CEO David Rotatori said one of the biggest threats to community banks is fintech companies. PHOTO | HBJ FILE Cynthia Merkle John Ciulla CT-based bank Total assets People's United now $63.2B People's United post- M&T acquisition $200B Webster Bank now $32.6B Webster Bank post- Sterling merger $63B Liberty Bank $7B Union Savings Bank $2.7B Bankwell Bank $2.3B First County Bank $2B Fairfield County Bank $1.7B Ion Bank $1.7B Newtown Savings Bank $1.6B Chelsea Groton Bank $1.4B Big vs. Small Banks The pending M&A deals involving Webster Bank and People's United Bank will make both of those lenders much larger than their community bank counterparts. Despite the growing size disparity, CEOs of some of Connecticut's downstream banks say they are sticking to organic growth strategies. Source: Bank financial statements the marketplace," Merkle said. Commercial business focus Since 2018, People's United and Webster have announced a combined approximately 50 Connecticut branch closures. The two regional banks are certainly not giving up on retail banking, but the extent to which they end up ceding some of those customers to smaller competitors may be a calculated move. Webster CEO John Ciulla, who will keep his top title after the Sterling deal closes, confirmed to analysts on a call last month commercial lending has become increasingly important to both Webster and Sterling, suggesting that growing Webster's health savings account niche may be a preferable way to grow deposits, rather than through standard consumer bank balances. "... we are stewards of capital, we deploy capital to those businesses that have the highest opportunity to generate economic profits over time," Ciulla said. "The real reason [Sterling CEO] Jack [Kopinsky] and I are sitting across the table is you've seen both of these banks over time transition to a more commercial footprint with an optimized and stable and solid retail footprint." "We care about those [retail] customers deeply, but we make sure that we are efficiently and effectively delivering for them," he added. While smaller banks are happy to poach away consumer business, they recognize there are potentially more profitable ways for bigger banks to deploy their capital. "The commercial customers are generally more profitable," Ion's Rotatori said. "The branch is basically the most expensive thing that banks do, and we've proved during the pandemic that you really don't need to go into a branch a lot of the time." Jared Shaw, an Avon-based senior equity analyst at Wells Fargo Securities who covers both Webster and People's United, said the commercial focus is shared by many large regional banks across the country. The largest national money- center banks are more incentivized by federal regulations to attract consumer deposits, which have a higher value when calculating bank liquidity levels. That has spurred some of the consumer-facing technology innovations, such as Bank of America's "Erica" AI-enabled chatbot, according to Shaw. "Big banks are incented to have retail deposits so they create products that help drive it, whereas banks like Webster and People's United differentiate by going after commercial customers," Shaw said.

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