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Fast 50

Climbing Back From The Bottom

Stronger Purchase Market Means Opportunities For Community Banks

The refinance market is far from dead, but lenders looking to make a profit off the Massachusetts housing market have increasingly set their sights on the purchase side of the business, as pent-up demand and greater confidence in the economy pushed more would-be buyers into action.

It’s not just multi-billion dollar behemoths making loans, either. A quick look at Banker & Tradesman’s Fast 50 will show you many Massachusetts-headquartered banks have been doubling, tripling, even quadrupling their purchase mortgage business over last year, when interest rates inched up and refinance demand dropped.

The Fast 50, compiled from data collected by The Warren Group, showcases the 50 fastest growing lenders for the first six months of the year, compared with the year-ago period.

While some out-of-town giants showed up on this year’s list – Ocwen Financial, for instance, which posted a 562 percent year-over-year increase in its purchase volume, or Goldman Sachs Commercial Mortgage Capital, which increased that line of business by 1,234 percent – many community banks also capitalized on pent-up demand, looking beyond their horizons and drumming up business by looking to Realtors and attorneys in the know.

Bank of Cape Cod, for example, showed the most dramatic year-over-year increase in purchase money mortgage volume, increasing its business to nearly $12 million in the first half of 2014, compared with $259,000 in the same period last year. That’s an increase of 4,529 percent, and it’s no small feat for a community bank on the verge of opening its fourth branch.

But that’s apparently more than sufficient coverage for Bank of Cape Cod. Around the middle of 2013, when interest rates inched upward a percentage point, the bank shifted its focus from the refinance business to the purchase business, said Dante DiMassa, vice president and director of residential lending. There, the bank found empty-nesters looking to downsize and new families eager to move into larger homes.


Dante DiMassaExpanding Their Footprints

Bay State Savings Bank in Worcester also looked to increase its purchase business around mid-2013, President and CEO Peter Alden said. Bay State Savings increased its purchase business 250 percent year-over-year in the first half of 2014, from $4.5 million last year to $15.8 million this year.

Alden said that some of this year’s growth has been due to Bay State Savings expanding its geographic reach beyond its traditional focus in the Greater Worcester area, toward Boston and the Cape. The bank has done more advertising outside its immediate Worcester area footprint.

“We have a good, generic name that plays well in a lot of different communities,” he said. “It’s nothing magical.”

Webster Five Cents Savings Bank increased its purchase business 1,240 percent, posting $24.9 million in purchase volume for the first half of the year, compared with $1.9 million in the same period last year.

And Blue Hills Bank apparently benefitted from its recent acquisition of Nantucket Bank, increasing its purchase volume 320 percent to $34.4 million from $8.2 million last year.

Indeed, a recent “County Close Up” in the Aug. 4 issue of Banker & Tradesman revealed that Blue Hills Bank now holds approximately 17.6 percent of the mortgage market share in Nantucket County, making it the #2 regional lender, second only to Cape Cod Five Cents Savings Bank; last year, it had no rank at all in the county.

“Nantucket has been a huge part of our growth this year,” said Bob Driscoll, the bank’s head of residential lending. “A lot of what we did here translated well over to Nantucket and helped us make inroads pretty quickly [there].”


Strong Pipelines Into Q3

Refinance business is still out there. To be sure, rates are still low and banks can make a tidy profit off those stragglers who did not lock in a new deal when rates were at their very lowest.

For instance, MutualOne Bank in Framingham increased its refinance volume 658 percent to $133.9 million from last year, and Bank of Cape Cod did 457 percent more refinance business than last year.

But the headlining story this year is the rebounding purchase market, and going into the third quarter, bankers who talked to Banker & Tradesman said their loan pipelines are even stronger during what would typically be considered a slow time of year.

“Traditionally, you would think it’d drop off a little bit in the summer, and it did, just a little, but it’s really been very consistent,” Alden said.

DiMassa echoed those sentiments, saying Bank of Cape Cod had felt a little bit of a lull in August, but still saw increased activity over the same period a year ago.

“I’m optimistic,” he said. “It seems to us that there’s an increased level of activity, prices seem to have come up a little bit, and it has spurred more inquires and overall activity within the market, so we’re optimistic. I think we’ve seen bottom.”

Email: lalix@thewarrengroup.com


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