🔒NBT banks on slow, but steady de novo branch strategy for CT growth

NBT Bank wants to grow in Connecticut by staying small.

The 165-year-old bank headquartered in upstate New York this year opened branches in Glastonbury and West Hartford as part of a play to expand into central Connecticut, NBT President and CEO John Watt Jr. said in a recent interview with Hartford Business Journal.

NBT, a subsidiary of its publicly-traded parent NBT Bancorp Inc., sees an opportunity here amid some banking disruption, particularly the significant mergers and acquisitions activity in recent years that has erased some smaller community banks from the map, Watt said.

The most recent example is New York-based M&T Bank’s pending purchase of Bridgeport’s People’s United Bank. The combination will create a $200 billion financial institution, and NBT is betting that not all customers or bankers will want to stay with a bigger bank, Watt said.

With $11.6 billion in assets, NBT is a regional bank that tries to position itself as more of a community lender.

It’s doing that by hiring local bankers with knowledge of the market and offering potentially a quicker turnaround time on loans through local decision making, Watt said.

NBT recorded $40.3 million in profits during the second quarter of this year and has a market cap of around $1.5 billion.

“There are customers who don’t want to be part of a $200 billion bank, and there are also bankers who probably feel that they have less authority and autonomy in an institution that large,” Watt said. “That provides opportunities for us.”

M&T Bank, which recently announced it would cut 747 jobs in Connecticut following its People’s United acquisition, including dozens of positions in Hartford, declined to comment for this story.

De novo strategy

In several ways the banking scene in central Connecticut resembles northern New England in 2008, when NBT saw an opportunity there, Watt said. People’s United had just acquired Vermont-based Chittenden Bank, and the atmosphere seemed ripe for reshuffling.

NBT’s foray into New England over the past 12-plus years has been somewhat unique in that it has focused on the more organic — and often slower — strategy of opening de novo branches, rather than acquiring an existing bank in those states.

It’s not that NBT hasn’t done acquisitions, but its market entries into Vermont, New Hampshire and now Connecticut — where it perceives opportunities for middle-market and small-market lending — have been largely from the de novo playbook.

The strategy typically involves hiring commercial lenders in a new market ahead of establishing any full-service branches.

NBT’s Connecticut Regional President Andreas Kapetanopoulos, who was formerly a senior banker at Farmington Bank, which was acquired a few years ago by People’s United Bank, said he sees plenty of opportunity in Connecticut, but that management also wants to be deliberate about its new investment.

NBT Bank first established a Connecticut presence in late 2019 and has built a 15-person team here so far. Kapetanopoulos said the bank will keep a heavy focus on commercial lending, even as it has opened its first brick-and-mortar branches in Glastonbury and West Hartford.

“I’d say 100% we’ve got the right team in Connecticut to build the foundation and grow the franchise,” Kapetanopoulos said.

NBT declined to disclose any financial details about its Connecticut market share, or how big of a loan portfolio it has developed so far. Kapetanopoulos did say the pandemic slowed traditional loan demand.

NBT so far is hitting its Connecticut growth targets, Watt added.

Despite recent consolidation in the industry, NBT will still have competition to contend with. As of June 30, 2020, there were 24 banks with deposits in Hartford County, led by market share leader Bank of America, which had $25.1 billion in local deposits, followed by People’s United Bank ($5.9 billion), Webster Bank ($4.9 billion), TD Bank ($3.4 billion) and Santander Bank ($1.9 billion).

Cultural fit

So, why Greater Hartford as a targeted growth market?

The bulk of NBT’s customers are small to mid-sized businesses and real estate developers, which are all hallmarks of the Greater Hartford region, Watt said. And unlike other parts of the tri-state area, central Connecticut lacks the hyper-competitive, growth-above-all-else ethos, he said.

“You’re not going to see us in Fairfield County or in New York City because I don’t think our model will work in those markets,” Watt said, referring to the bank’s more conservative, long-term approach to doing business. “We perceive that the business community [in central Connecticut] culturally aligns with how we think about the world, as opposed to a more frenetic, aggressive culture in the urban/suburban tri-state area.”

Local real estate developers are especially alluring right now, Watt said, because so many are planning significant developments. In addition to a number of proposed apartment building projects, companies like Amazon are looking for warehouse space, and NBT has experience financing warehouse construction projects.

“Quite frankly, I think in this market the opportunity to service small business and the lower-end middle market is higher than in other [areas],” Watt said. “Our bankers all have those relationships with that part of the market on the commercial side that I think we’ll be able to leverage.”