If there were any doubt about his bank’s commitment to New Jersey … Steven Fusco put that to rest by making reference to “The Sopranos” and its final, unexpected conclusion when talking about the suddenness of the pandemic’s business impact.
But there was no fade to black for Elmwood Park-based Spencer Savings Bank. Throughout the turmoil of that time, it was among a gang of community banks deciding the best thing to do during an uncertain time was to make even more investments.
Fusco, chief financial officer of the mutually owned Garden State bank, the largest such institution in the state, said there was a decision made by the executive team and board to not just worry about keeping the lights on — but to grow.
“If anything, the pandemic really galvanized the company to work even harder toward addressing what we needed to do,” he said.
In 2021, the bank announced it was purchasing Edgewater-based Mariner’s Bank, which held six branches in North Jersey. The merger, a relatively uncommon pairing of a mutual bank with a stock-traded bank, helped bring Spencer Savings Bank up to 26 locations in the Garden State, and about $4 billion in assets.
“We saw this as a great opportunity for us to expand our footprint in Bergen County, adjacent to the New York City market,” Fusco said. “We pulled everything together and executed the transaction in a really disrupted market. It was one of the fastest mergers I’ve been a part of, from announcement to closing date.”
For the bank’s leaders, it was another example of being aggressive at what turned out to be the right time. The more than 100-year-old bank, which has doubled in size over the past decade, went aggressively after the business banking market about 15 years ago.
Fusco said the bank’s leaders at that time made a bet that the consumer-focused business of savings banks would become commoditized by the space’s largest players and difficult for a community bank to rely on over time.
Sure enough, the amount of commercial banks with more than $1 billion in assets has increased by 56% between 2012 and earlier this year, while the amount of savings banks with the same assets has declined by 15%. Savings banks with less than $1 billion in assets have fallen off by 58%.
“So that strategic shift allowed us to not only survive, but grow and play a vital role in the growth of communities, as a bank without shareholders,” he said.
Especially as the banking industry continues to consolidate, community banks that want to continue operating independently have had to make the right moves at the right time.
Over Spencer Savings Bank’s history, a great many similar-sized banks in the market have been acquired by larger partners. The industrywide trend has brought the number of New Jersey-chartered banks down to half the number it was about a decade ago.
“And, at the same time, New Jersey-headquartered banks are only getting bigger,” Fusco said. “If you look at banks greater than a billion in assets, in the past three years those institutions have grown more than 40%.”
While that means community banks have to do more — with technology, products, marketing, etc. — to stay competitive with those larger-scale banks, it also presents an opportunity for small- and midsized banks to continue to serve customers that prefer local institutions, Fusco said.
That’s part of what he credits for the bank having some record years for lending throughout the pandemic — and why he expects many more good years ahead.
“I’m excited about the path we’re on,” he said. “We’re going to continue to expand throughout New Jersey … and continue to invest in the communities we serve and make an impact in them along the way.”
‘Very guarded and thoughtful’
It’s safe to say small- to midsize banking experienced an unsteady spring — with three institutions toppling over within the span of a week, stoking fear of a larger community bank domino-fall.
But, local bankers said the industry is back to standing tall after the March crisis, considered the fastest bank run in U.S. history.
From his perspective, Chris Maher, chair and CEO of OceanFirst Bank, the summer earnings season provided evidence for what bankers were saying themselves: The sector remained generally profitable and had plenty of liquidity.
“While the industry is not back to where it was before the Silicon Valley Bank (failure), it’s far better than it was in the days following that,” he said. “We bounced back substantially.”
Maher said the episode was a reminder of the sector’s basic tenants: Banks need to be careful about interest rate risk. Another takeaway was that the velocity at which money moves — as well as information in the age of social media — is much greater than it ever has been.
When it comes to other lessons learned, Steven Fusco of Spencer Savings Bank added that over-concentration in one particular segment of the market can work against a bank’s health. Maher agreed, citing an industry adage that “concentration kills.”
For the coming earning seasons, industry-watchers are going to be paying attention to whether the interest rate environment is harming banks — and to what degree.
In the grand scheme of things, Maher isn’t optimistic about the coming year of business.
“The current economy is stronger than I would’ve expected at this point of the year,” he said. “But, there’s some events coming in the next quarter or two that run the risk of creating an issue in the economy. That begins with the averted government shutdown, which really just kicked the can down the road 45 days. We don’t have resolution around labor issues, including the (United Auto Workers) strike, which could end up being debilitating. And we’re not sure how consumers are going to perform with student loan payments commencing again, which could take the last bit of liquidity out of their hands. Oil and gas pricing isn’t friendly and the housing market is continually challenged.
“There’s a lot of reasons to be very guarded and thoughtful about 2024.”