Banks making the most out of late '90s

Vermont Business Magazine, Mar 01, 1998

Ironically, unconventional loans based on knowledge of individual customers has been a characteristic niche of small, independent Vermont banks -- though across a wider income spectrum.

KeyBank already has a wholly owned subsidiary, Key Investments, Inc (KII), to tap into the market for securities, Smith said. In Vermont, there are two brokers who work out of the banks.

Insurance? "That is developing," Smith promised. "There are lots of things being piloted in other pans of the country that have not been rolled out in this district. We expect to be involved in the insurance business."

As for the future, it's too futuristic for Smith to predict, especially since it remains unclear what the final shape or roles of the Internet may be.

"The industry is changing very fast," he said. "I just don't know what it will look like in 10 or 12 years."

The other out-of-state banks in Vermont branches are Albank, FSB, of Albany, with 12 operations in the middle part the state (Rutland's Marble Bank was a major acquisition several years ago); and Mascoma Savings Bank, FSB, based in Lebanon, NH, with eight mainly Upper Valley area branches.

Mascoma president Stephen Christy said 1997 "went very well" in Vermont, though like many business leaders he is watching closely to see how Act 60's changes in school taxation will affect the Vermont economic climate and real estate market. All segments of their operations have been strong, though he called the depository situation "problematical. People continue to look for other avenues of investment." So far, money sources like the Federal Home Loan Bank have prevented any serious incoming-outgoing bottlenecks, he said.

The difficulties of coordinating national operations were illustrated in August of 1997 when Albank Financial Corp agreed to a settlement with the Department of Justice, which has alleged "redlining," of communities in New York and Connecticut with high minority populations. Albank, which denied the charge, agreed to provide $55 million in loans at lower than market rates rather than take the time and money to go to court.

Albank said the real problem was that since the communities in question were served by correspondent banks rather than branches, they had no idea of the demographic situation. Professional Bank Services, Inc of Lexington, KY, in a report on the affair, commented that "The message from the Department of Justice is clear: ignorance is no excuse."

It was a minor disruption for the $3.1 billion thrift. Its stock, which closed at about 31 as of January 1,.1997, hit a high around 50 at the start of 1998, and last traded at nearly 48. Smart Money, the Wall Street Journal's investment magazine, had touted regional banks stocks as. good buys for 1997, and their January 1998 follow-up concluded that the prediction has indeed been sound.

IS BIGGER BETTER?

Leaving aside the banks with out-of-state headquarters and Vermont branches, three Vermont institutions stand out in terms of size, scope and resources. Going alphabetically: The Banknorth Group, Inc holding company, based in Burlington, includes the Howard Bank, NA, in Burlington and First Vermont Bank in Brattleboro, among its six subsidiaries around the state, as well as the Farmington National Bank in New Hampshire and the First Massachusetts Bank, NA, in Worcester. Its stock (BKNG) went from 40 to 65 in 1997.