It’s an understatement to say the business of banking is tricky. As customers who make deposits and take out loans, we see only about 10 percent of a bank’s operations. It’s an industry where customers insist on the latest technology while also demanding hands-on personal service in expensive retail locations. And increased regulations and government oversight have many bank managers scratching their heads. But banking is a pretty profitable business, too, which may be one good reason there are so many banks in Westchester.
“The county is a hotbed of banking, with a great group of competitors large and small,” says Bob Como, senior vice president and market manager for JPMorgan Chase. According to the FDIC, 38 institutions operate 366 bank locations in the county. The major national banks, like Chase, Citibank, Bank of America, and Wells Fargo, compete for Westchester business along with significant regional players, like TD Bank, First Niagara, and Sterling Bancorp. Not to be ignored are important local operators, including The Westchester Bank, Hudson City, and People’s United. Chase is by far the market leader in the county, operating 101 branches and holding a commanding 27 percent share of non-private bank deposits, per the FDIC.
The basic profit proposition of banking, of course, is borrowing money from one customer (taking in deposits) and lending it to another. Westchester is an ideal location for both. There’s a great deal of consumer wealth here, which generates deposits, fees, and personal loans, and a vibrant business community that needs things like cash-management services, commercial real estate financing, and business loans. According to the Federal Reserve Bank, the net interest margin (the difference between what a bank pays depositors and collects from borrowers) for banks in the US in the second quarter of this year was almost 3 percent. That doesn’t sound like much until you consider the billions and billions of dollars involved.
And, while the bank really wants your kids’ college savings account, it really, really wants to do business with the company you work for—or own. As Jack Kopnisky, CEO of Sterling Bancorp explains, “Most of the clients on the commercial side have families, too, so we want to make sure we do a good job for them on the consumer side.”
The breadth of business opportunities here is one reason the county has such a strong banking presence. “In Westchester, you have a very large medical community, an incredibly well-done service industry with attorneys, accountants, and real estate owners, and some manufacturing and light industry,” Kopnisky says. “There are wonderful growth dynamics and great diversity in the types of companies here.”
Robert Cerminaro, senior vice president and tri-state market executive for First Niagara Bank, agrees wholeheartedly. “Westchester is very healthy, with a wide range of [lending] opportunities from small companies to middle-market to major corporations,” he says. To better serve that business, First Niagara moved its regional headquarters to Tarrytown in 2014, after buying five branches in the county from HSBC.
First Niagara’s move isn’t the only change in the county’s banking landscape in recent years. Sterling Bancorp merged with Hudson Valley Bank this year, creating a bank with more than $11 billion in assets serving the New York metro area, with 19 branches in Westchester alone. CMS Bank merged with Putnam County Savings Bank this year as well, and Orange Bank & Trust opened its first branch in the county in White Plains this year.
Others, including The Westchester Bank, have announced additional branch openings. “Our plan is to add a branch a year,” says John Tolomer, CEO of The Westchester Bank. “Ultimately, we’d like every Westchester customer to be within a 10-minute drive of a location.”
One impetus for these changes is the benefit of scale. While smaller banks can be strong competitors, larger size has its advantages. “We’re able to do more for clients now,” Kopnisky points out. “Formerly, Hudson Valley Bank didn’t have a very big mortgage offering, but Sterling can provide a much broader mortgage product set. On the other hand, Sterling had a limited cash management product, whereas Hudson Valley’s was best in class. So the combined company can bring the best of both worlds to the client.”
A Choice of Channels
Perhaps the biggest dilemma facing bankers in Westchester today is how to satisfy customers’ needs for ever-better technology along with their demands for greater personal interaction with human beings. “People want to have a choice of channels,” Kopnisky says. “They want to go to a branch, to an ATM, go online, or use mobile devices, but they also want to have someone who can talk to them as an advisor.”
Como adds, “The amount of time clients have to do traditional banking has become smaller and smaller. Twenty years ago, they chose their bank based on convenience, which meant you walked out of your office, took a left, and the bank branch happened to be right there. Today, convenience means doing business more efficiently in many different ways. You need a very solid online system, and the cash management suite of products is very important. Whether it be online access, quick deposit, ACH (automated clearing house)—things like that make a client much more efficient. Out of that you can have conversations about their capital needs.”
According to Cerminaro, technology is absolutely key—which explains why First Niagara is undergoing a system-wide technology investment of $250 million that will come online in 2016. “Retail banking has changed significantly,” he says. “Having more branches isn’t necessarily better anymore.” And that applies to business banking, too. “A branch really amounts to high-cost advertising,” he explains. At the same time, though, every banker we talked to for this story emphasized the importance of personal contact. “Investments in technology and people aren’t mutually exclusive,” according to Como. “You’ve got to provide the technical connection, but at the end of the day, the client wants to know who they do business with.
“We have always viewed ourselves as a relationship banking platform,” Como adds, explaining that customers are looking for someone who’s not just going to sell them the next best product, but “who’s going to add value to the transaction.” For banks, that means matching the right bankers to the right clients. “You have bankers who are developing their skills who are probably better suited to a certain clientele, while you have others who have a great deal more experience, and you match them to the larger clients,” Como says.
The Westchester Bank’s business model depends on face-to-face relationships, according to Tolomer. “We’re built to make banking a more personal experience,” he says. “One thing the meltdown of 2008 taught us is that, when people have problems, they’d prefer to speak to an individual than call an 800 number or go online.” So where does technology come into the picture? “Our goal is to leverage state-of-the-art technology to provide more time to understand the customer’s needs,” Tolomer says. “To be able to visit them and learn more about them. The key element to doing business is being ready to help every customer. It’s always about people.”
The county also has great depth of banking talent in the workforce, according to Cerminaro. “One of the reasons we chose Westchester as our regional tri-state headquarters is that we felt good about the county from a talent-acquisition standpoint,” he says.
Size helps in recruiting, too, according to Como. “Chase can not only attract people because of the name, but because we can give employees opportunity to move within the organization and even geographically. You might start in a branch environment then move to a business banking position. We’ve had bankers move from there to middle-market banking positions dealing with larger clients.”
As successful as it is, Westchester’s banking industry isn’t immune to assaults on multiple fronts. One is the regulatory environment, which has become more complex since the financial meltdown in 2008. Banks are chartered at either the state or federal level, but all are subject to oversight by the FDIC, the New York State Department of Financial Services, and the New York Fed.
According to Cerminaro, the increased regulation has impacted banks of all sizes. “It has had a lot of effect on money-center banks [like Citibank and Chase], as well as the regional players. Our due diligence related to opportunities and transactions has been elevated. There are a lot of behind-the-scenes checks and balances, but we try to not let the regulations affect our relationship with our clients,” he explains.
Then there is new competition. Both online-only banks and brick-and-mortar banks located in other states can and do collect deposits and sell products to both retail and business customers online. In addition, Cerminaro points out, “We’re seeing a significant shift in the way some corporations are sourcing capital.” He says financial institution-sponsored lending activities have brought firms like Goldman Sachs and Merrill Lynch into direct competition with traditional commercial banks for loans to the business customer. “They’re taking on smaller, riskier loans, too, because returns there are more attractive,” he notes.
Tolomer views more competition with equanimity. “There will always be threats of non-bank startups that will take an aggressive approach,” he says. “We make it a practice of being very transparent about what we can and can’t do for a customer. At the end of the day, if our customers prosper, we will prosper. If they don’t, we won’t.”