Rising interest rates, a decline in mortgage refinancing, expanded banking technology, and an increase in renewable energy loans are some of the trends that several local banks say they see for 2017.
Officials from Florence Bank, Easthampton Savings Bank, Greenfield Cooperative Bank and Northampton Cooperative Bank, UMass Five College Federal Credit Union, and Peoples Bank weighed in on these issues and what customers can expect in the coming year.
“For interest rates, we will see maybe two to three increases in the coming months,” said John F. Heaps Jr., president and CEO of Florence Bank. “That will certainly help savers and seniors on a fixed income.”
Heaps also noted that trends show millennials in particular are very interested in saving for the future, so the coming increase in interest rates will be good news for them.
While rates for savings accounts and CDs still remain very low, Michael Tucker, the president and CEO of Greenfield Community Bank and Northampton Community Bank, said consumers interested in savings are bidding their time until that changes.
“Right now I think people are staying in shorter term CDs for a while as they wait to take advantage of higher rates,” Tucker said.
Increasing interest rates will also create a shift in the mortgage landscape, as consumers will be less inclined to refinance their homes.
“With interest rates increasing, we expect the mortgage volume to be down because refinancing made up the best part of the mortgage business for the last eight years,” said Tom Senecal, Peoples Bank president and CEO. “However, we do expect home purchases to go up by 15 percent as soon as the interest rates go up and the refinancing market goes away.”
According to Tucker, over the last 35 years the historic interest rate average was 5.5 percent for savings and 8 percent on mortgages.
“I do see rates creeping up, though I don’t think that it will stop people from purchasing homes,” Tucker said. “We saw strong real estate sales last year and expect the same this year.”
Some lenders say they are looking forward to a continuing upward trend in solar loans.
“Solar financing was very hot in 2016, because of incentives and the progress in the Department of Energy Resources,” said Richard Kump, UMass Five vice president of member service and chief operating officer. “We anticipate solar financing to be very strong in 2017.”
Senecal said that Peoples Bank has done a significant amount of financing for renewable energy on commercial side and he expects that to remain consistent this year as well.
“In the past couple of years, we have seen significant growth in financing solar farms, those have really skyrocketed,” Senecal said. “We have more than $100 million in loans for renewable energy, including solar, wind and hydro.”
However, as incentives for solar installations begin to subside, some say this will decrease the number of new solar projects in the state.
“We have done a lot of solar investments, but it is now being challenged by the falling of solar subsidies,” said Matthew Sosik, president and CEO of Easthampton Savings Bank. “I think solar loans will slow down dramatically as the subsidies wane.”
While most banks said they cannot compete with the financing provided by car dealerships, UMass Five is expecting to increase its auto loans.
“A lot of folks had their credit hurt and now, even though they have recovered, it doesn’t really look like that on paper,” Kump said. “We think it is important to find ways to get consumers who struggled during the recession, into decent cars. So we anticipate doing lower credit score auto loans this year.”
Small business loans may also be picking up in the near future.
“We have seen the need for small business micro loans so are just getting into the business lending game,” Kump said. “The face of the borrower is changing and we need to find ways to serve them.”
Peoples Bank also recently launched a new small business loan of $100,000 or less for businesses owned by current customers.
Senecal says that they have streamlined the process to the point where “turn around time is one day from application to funding.”
Technology will continue to play a very large role in increasing banking services and cyber security.
Senecal said that Peoples Bank has experienced a large increase in electronic banking.
“Our online banking is up 96 percent since 2012, and we expect that will continue to grow,” he said. “Our mobile app use is up 220 percent since 2012, with mobile deposits increasing by 140 percent since 2014. We expect that to continue at an even greater pace,” Senecal said.
Heap noted that Florence Bank’s electronic banking activity is up 203 percent, while people using mobile phones to make deposits are up 200 percent from 2015.
“With our mobile app you can turn off your debit card when not in use, or put a hold on the card if it is lost,” Heaps said.
UMass Five has added interactive teller function at its ATMs, in which a customer can reach a teller via video. They have also provided informational touch screens within their lobby at their new Northampton location.
Besides streamlining customer services, banks and credit unions are relying on new technologies to combat fraud.
“Banks in general are constantly under fire and they have to be vigilant every minute of every day,” Sosik said, noting that the fight against advanced fraud techniques is important for all lending institutions. “We are constantly investing in innovative technologies that help us to prevent cyber security risks.”
With all of the new technology in bank delivery services, some may question the viability of physical bank branches but bank officials say that brick-and-mortar locations continue to be necessary.
“I am often asked if the future of the branch is gone and I would say no,” Heaps said. “As we say, ‘bricks equals clicks.’” Branch traffic has gone down, but it has shifted to more sales and service.”
Kump echoed that sentiment.
“Overall, we are seeing fewer people in the branches as they migrate to digital and there is less teller traffic, but the need for more qualitative conversations has gone up because it is no longer just routine transactions.”
As evidence that physical branches are not yet going the way of the dinosaur, Easthampton Savings Bank is planning to open a branch in Holyoke and Florence Bank is also expanding with plans for a branch in West Springfield.
Overall most bank officials said they believe consumers are feeling more confident in the economy.
“I absolutely see that people have more confidence in the economy,” Tucker said.
“The local economy in Western Mass was a good year in 2016, and there are a lot of positive signs up and down the valley,” he said noting the low unemployment rate, new building projects, an upswing in the stock market and people investing in small businesses.
“Being a mutual bank, we can focus on making long range decisions that benefit our customers and we feel good about what is going on in our community,” Heaps said. “We are hopeful that we will see less regulation and we are hoping to see more action and less talk.”