October 26, 2009 | last updated May 26, 2012 8:58 am

In State, Larger Banks Unscathed By Bailouts

In the all important battle for market share between Connecticut banks, Bank of America still remains king, although its lead has narrowed.

Bank of America recorded $18.6 billion in Connecticut deposits at the end of June, controlling 20.5 percent of the market in the state, according to Federal Deposit Insurance Corp. data released last week. However, although the bank's depositor base grew by about 5 percent from the previous year, its overall control of the market shrunk slightly from 21.3 percent in 2008.

Overall, larger national and regional banks continue to maintain their stranglehold on the Connecticut banking scene, despite some thoughts last year that smaller community banks would be able to grab market share away from some of them, especially those institutions closely linked to the nation's financial crisis.

The FDIC data did not provide statistics on loan volume.

Total deposits for Connecticut's 71 banks were $90.6 billion at the end of June, a 9 percent increase from the year ago period. The 10 largest banks, which all have a national or regional presence, own 75 percent of the Connecticut market with $67 billion in total deposits.

Webster Bank, People's United Bank, Wachovia Bank and TD Bank, round out the top five banks in the state, owning 12.5 percent, 10.4 percent, 7.7 percent and 5.2 percent of the deposit market respectively.

Of the 71 banks that operate in Connecticut, 63 of them saw an increase in deposits, while eight banks saw their deposit base decrease.

"I'm a little surprised that the smaller banks didn't get more market share, but when you see some of the larger banks on the list, it didn't surprise me as much," said Phil Lane, an economist with Fairfield University. "A lot of the larger banks in Connecticut gobbled up former smaller institutions, which has given them a stranglehold on market share."

In 1994, state-chartered banks dominated Connecticut with 60.5 percent of the deposit market, while the 10 largest federal-chartered institutions had 38.3 percent. Since then, mergers and acquisitions helped federally chartered banks in Connecticut — including Bank of America, Wachovia, TD Bank National, JP Morgan Chase and Sovereign Bank — grow dominant.

The Hartford Business Journal reported last fall that some of Connecticut's small banks were noticing an uptick in deposit activity as larger banks were increasingly facing negative headlines as a result of major investment losses, bad loans and bailouts.

Some industry insiders saw it as a rare opportunity for community banks to close that market share gap, especially as nervous investors were pulling money out of the stock market and looking for safe places to store it.

Lane said there could be several reasons that community banks didn't make much of an inroad.

Some of the larger banks that ran into financial troubles over the last year, including Bank of America and Citibank, received large sums of federal government bailout money, providing a stabilizing effect to their financial position, Lane said.

Additionally, the FDIC boosted its insurance coverage from $100,000 to $250,000, giving depositors more comfort about the safety of their savings, and making them less inclined to move their money from one bank to another.

"Community banks may have lost a couple bucks because of that," Lane said.

Lane also said depositors are oftentimes hesitant to move their accounts from one bank to another because of the hassles involved with that, and also because there are no banks providing exorbitant yields on certificates of deposit, giving them less reason to shift their money.

"As long as bank's fee structures didn't get out of line, people are hesitant to move their money," Lane said.

Among the biggest movers and shakers on the market share list was newly formed New England Bank, which was ranked 26th in the state with $518 million in deposits.

Earlier this year, New England Bancshares merged its former Enfield Federal Savings and Valley Banks subsidiaries to create New England Bank. It then acquired the three-branch Chesire-based Apple Valley Bank & Trust, giving it a noticeably larger footprint in central and north-central Connecticut.

In January, David J. O'Connor, president and CEO of the banking company, which now has 15 branches in the state, said the merger will improve efficiencies by eliminating the regulatory and administrative costs of running two separately chartered banks.

Michigan-based Northern Trust Bank, which has one branch in the wealthy town of Stamford, increased its depositor bases by nearly 600 percent to $247 million.

Farmington Savings Bank, which recently announced aggressive plans to expand its presence in the state, including opening a new branch in Glastonbury, saw its deposit base expand by 21 percent to $985 million.

Other Greater Hartford banks that improved their market share rankings in the state included Simsbury Bank & Trust (39th), Hartford-based Connecticut Bank and Trust Co., (45th) and Wethersfield-based Connecticut River Community Bank (52nd) with $243 million, $184 million and $150 million in deposits.

One bank noticeably no longer on the list was Nevada-based Washington Mutual Bank, which had 13 branches and $248 million in deposits in Connecticut last year.

In September 2008, the U.S. Office of Thrift Supervision seized Washington Mutual Bank and placed it into the receivership of the Federal Deposit Insurance Corp., after depositors made a run on the bank, withdrawing $16.4 billion over a 10-day span.

Washington Mutual's failure marked the largest bank failure in U.S. history at the time, and the FDIC sold the banking subsidiaries to JPMorgan Chase for $1.9 billion.

JP Morgan Chase boosted its deposit base in Connecticut over the last year by 16 percent, with over $4 billion in deposits.


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