More than half of Massachusetts 50 fastest-growing commercial lenders this year were community banks and credit unions.

Local banks and credit unions have emerged as big winners from the 65 percent year-over-year- growth in commercial mortgage volumes statewide this year.  

Community banks and credit unions accounted for more than half the lenders featured in Banker & Tradesman’s Fast 50 commercial lenders, based on both number of loans and mortgage volumes. 

For many community financial institutions, commercial real estate provides a significant source for income, especially as residential loan demand has softened. But with questions swirling about where the American economy is headed, those same lenders are sounding a cautionary note.  

“It’s not just that we were in a position to loan more money, it’s also the fact that borrowers wanted to take advantage of that low interest rate opportunity,” said William Benford, executive vice president and senior commercial lender at Bluestone Bank. “Now that we’ve seen interest rates move up, it’s slowed down on the borrower side, but I also think that we as a bank are going to be a little bit more cautious, understanding that we’re potentially heading into some type of economic downturn.” 

Lender Pivots with the Market 

The Fast 50, compiled from data collected by The Warren Group, publisher of Banker & Tradesman, reveals the 50 fastest-growing lenders in Massachusetts for the first six months of the year, compared to the same period a year ago. 

Massachusetts had 5,084 commercial mortgages from January through June of 2022 worth $44.2 billion, compared to 5,107 loans worth $26.6 billion in the first six months 2021. 

With demand for office and retail space still not recovered from the effects of the pandemic, having an experienced team of commercial lenders has helped Webster Five pivot as commercial real estate markets have changed, said Christopher Watson, the bank’s senior vice president and senior lending officer. 

The $1 billion-asset Webster Five grew its commercial mortgage volume more than 800 percent year-over-year. Some of that activity included deals that the bank began working on 2021 and closed in the first half of this year, Watson said. 

Who Are Massachusetts’ 50 Fastest-Growing Lenders? See Our Rankings to Find Out.

Industrial warehouses for last-mile distribution drove the bank’s commercial real estate lending last year, Watson said. He added that while that activity has since tapered off, the bank has more recently seen an increased demand for industrial flex spaces, as well as housing-related deals. 

Watson said Webster Five’s lending team has built relationships with commercial real estate brokers over the years, leading to opportunities to get involved with multiple deals. Much of the bank’s growth has come locally.    

“People automatically think that a lot of the growth came out of the Boston area, but Worcester is our backyard,” Watson said. “We’ve been able to successfully be part of quite a few projects in the Worcester area.” 

For several local lenders, long-term investments in building relationships or teams set them up for success in 2022.

Investments in Gateway Cities Pays Off 

The $691 million-asset Reading Cooperative Bank does not have a branch in Lawrence, but the city has been the site for much of the bank’s recent commercial real estate growth, said Phil Bryan, Reading Cooperative Bank’s executive vice president and chief banking officer.  

Reading Cooperative saw the number of commercial real estate loans increase year-over-year in the first half of 2022 by more than 200 percent.  

The commercial lending team started focusing on the Lawrence market about three years ago, Bryan said, and opportunities there have included construction, small multifamily projects and apartment building renovations in that post-industrial, immigrant-driven Gateway City market.  

The bank saw the flow of commercial real estate deals begin to build about 18 months ago, Bryan said, and the bank entered 2022 with a strong lending pipeline. 

He added that most of the opportunities the bank has found are with borrowers experienced in commercial real estate, with few newcomers getting involved with properties in the current business environment. Some of Reading Cooperative’s opportunities have come out of past successes. 

“Because we’ve got such a good reputation in Lawrence, and we’re becoming kind of a household name, we’re seeing a lot [of activity],” Bryan said. 

The bank also acquired branches in Lynn and Nahant from Coastal Heritage Bank last year, and Bryan said that Reading Cooperative has started building its commercial lending business in that other Gateway City market, as well.  

“That’s new territory for us, and we see some similarities with what we have in Lawrence,” Bryan said. “We think we can make a pretty good splash there and really get ingrained in that community as well.” 

The commercial loan pipeline remains similar to what the bank saw at the end of 2021, Bryan said, though the number of opportunities for new deals has recently started to slow down as interest rates rise.  

While commercial real estate drives lending on the commercial side of its portfolio, Bryan said, the bank has seen growth in its residential mortgages business in 2022, particularly with adjustable-rate mortgages. He added that looking ahead, the bank plans to do more consumer lending to balance its loan portfolio.  

Merger Sets Lender Up for Success 

Raynham-based Bluestone Bank saw its commercial mortgage volume in the first half of 2022 increase by more than 240 percent year-over-year. The bank was created out of Bridgewater Savings Bank’s acquisition of Mansfield Bank in October 2020, and the results of that merger have driven Bluestone Bank’s commercial lending growth, said Benford, the bank’s executive vice president and senior commercial lender. 

The $1.3 billion-asset Bluestone Bank has more capacity now to work with existing clients on multiple projects, Benford said, and the bank can do larger deals than either parent bank could do before. While the merger was completed nearly two years ago, the bank needed time to position itself to access these deals.  

Diane McLaughlin

“The ability to do the larger deals doesn’t necessarily happen overnight, because you’ve got to have your lending staff in the marketplace, with referral sources that understand you have that increased capacity,” Benford said. “Maybe deals that they didn’t show you in the past, they now can bring to you, and you can do it.” 

Bluestone Bank has found lending opportunities working with both multifamily buyers and owners looking for cash-out refinance loans. Other loans have been for purchasing properties to renovate or build new houses and sub-division developments.  

Benford also chairs the Massachusetts Bankers Association credit committee, an informal group made up of bankers across the state. As interest rates rises and the economy changes, most banks do not plan to change their credit profiles or planning to stop lending, Benford said, but they expect to be cautious when entering into new opportunities and new relationships.  

Bluestone does plan to diversify its loan portfolio, Benford added, but slowly and through organic growth. 

“We’ve really embedded the risk appetite and the risk profile and the risk management, if you will, around commercial real estate for the bank,” Benford said. “I do think it will always be a very large part of what we do.”