Thirty years ago, 100 banks were doing business in NH. Today there are 39. “The most obvious change in the past 30 years has been the consolidation of institutions,” says Ronald Wilbur, retired NH Banking Commissioner. The state’s five largest institutions “failed and were taken over by other institutions” during the Savings & Loan crisis of the 80s and 90s, while community banks, faced with increased regulations, have consolidated.
“Back in the 1980s, the mantra was deregulation,” Wilbur says. “It was said that the marketplace will run us. Clearly we have seen since then that there was need for some regulation. But the brush that is being used is very, very broad.” Passed in 2010 in response to the 2008 financial crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act has generated 13,000 pages of federal regulations. “It is definitely the most significant piece of financial legislation we have seen in the past 30 years,” says Christiana Thornton, president and CEO of the NH Bankers Association. “In many ways, New Hampshire’s banks are still working toward implementing the new legislation and complying with it.”
New Hampshire did not see any banks fail due to the Great Recession. “Our state weathered the crisis well,” says NH Banking Commissioner Glenn Perlow. “We have 17 state-chartered banks, ranging in size from $100 million in assets to $1.3 billion in assets, who are past the crisis and are doing well.” The state even is home to one of the nation’s newer banks, Optima Bank & Trust, Perlow says. Opened in 2008, just as the recession hit, the locally owned commercial bank has grown steadily, says President and CEO Daniel Morrison and now has assets of $308 million as well as five branches and a loan office.
But increased regulations have exacted their toll. “Certainly a factor in our decision to sell Centrix Bank was the regulatory burden increasingly being put on banks,” says Joseph Reilly, who was co-founder, president and CEO of Centrix, and is now NH regional president for Eastern Bank, which acquired Centrix in October. He predicts, “whether banks want to admit it or not, there will be more consolidation over the next three to five years.” This was only the latest acquisition in the state, as Hampshire First merged with NBT Bank in June 2012 and The Nashua Bank was acquired by NH Thrift Bancshares in August of the same year.
Undoubtedly, contrasts abound to the 80s. Then interest rates were at record highs of 18 percent, now they are at historic lows of about 4 percent. Experts predicted ATMs would ring the death knell for branches. The same is now being touted of mobile banking. Though there are fewer banks, there are more branches than ever—429 statewide. Interstate banking has allowed banks from neighboring states to open branches or loan production offices here.
“The death of the branching system has been predicted by many because of digital banking for some time,” Reilly says. “But you do have to continue to be in good physical geographies. If not, out of sight, out of mind.” Though he says new branches are more likely to be smaller.
The industry’s community impact is particularly evident in the nonprofit sector where 6,000 NH bank employees volunteer 66,500 hours annually at the local level. The industry also contributes $6.5 million in charitable giving, according to a 2012 NH Bankers Association survey. “If you took that money and that time out of the state of New Hampshire, it would be felt significantly,” Reilly says.
Competition in the banking industry is heightened by the growth of credit unions as well. Forty-one percent of the state’s residents belong to a credit union, says Paul Gentile, president and CEO of NH Credit Union League. Over the past decade, especially since the housing market crash and the financial crisis that began in 2008, NH's credit unions have been capturing a larger share of the market, with deposits at NH credit unions up about 30 percent more than deposits at banks.
The NH Bankers Association and Community Bankers Association are rankled by the fact credit unions don’t pay corporate income tax or NH business profits tax as banks do and continue to lobby against what they call an unfair advantage.
“There is a role for banks of all sizes and shapes in the landscape of New Hampshire,” Reilly says. “They all offer different choices.” Yet he is quick to add, “I think that if you’re a banker it’s great to have a five-year strategic plan. But you better have a shorter-term tactical plan as well.”
Editor’s note: Rachel M. Collins is a freelance writer who previously served as vice president of communications for Optima Bank & Trust in Portsmouth.