Darryl Fess, President & CEO, Brookline Bank
Brookline Bank CEO Darryl Fess provided Invest: with a comprehensive understanding of Boston’s banking industry, described how Brookline Bank evolves to keep up with market and regulatory changes and shared how the bank has continued to achieve success for the past 150 years.
What are some of the most significant accolades achieved by Brookline Bank over the recent years?
Brookline Bank recently celebrated its 150th anniversary, publishing a book commemorating this achievement. I have been with the bank for 14 years, and it seems as though we have had as much change during those years as the previous 136. We started out as a community savings bank and have transformed over the last decade into a commercial bank. We now offer all of the products and services offered by big banks, but we can provide these same services on a much more personal level. In the last decade, we have focused intently on our commercial clients. We understand we can’t necessarily compete with Bank of America and Chase for retail clients because they have astronomical marketing budgets. But we aren’t looking to be a mass-market bank — we aim for relationship banking, both in the commercial and consumer sectors.
It’s been a challenging year for banks since the Silicon Valley Bank crash. People were nervous and worried about their deposits. Brookline Bank’s 150-year history is an indicator of our long-standing, conservative approach to banking. We’ve never lost money, and we don’t plan to do so in the future. The SVB crash was a trying time that saw many banks struggle with liquidity. We did what we had to do to ensure our clients were comfortable, including phone calls from me or the CFO of our holding company.
Could you provide insight into the current economic sentiment in Boston, and what is your overview for banking in Boston as a whole?
Boston is an incredible market to be in. Banking is highly competitive, as there are still well over 100 banks operating in Massachusetts. In some other parts of the country you don’t have that level of choice, but we don’t mind competing. Boston has an awful lot going for it across multiple industries. We have some of the best schools in the world, which attract new jobs. Our city’s economy is diverse, with strength being cultivated through education, biotech and finance. Boston’s walkability and intellectual environment make it an attractive place to live and do business. There are myriad legs to our economy, so if one sector is suffering, it doesn’t necessarily cause a major problem for us in terms of the overall economy. It’s a great place to do business, especially if you need a well-educated workforce to help you grow.
As you would expect, with over 100 banks operating in Massachusetts, the industry is experiencing consolidation which will likely continue over the next several decades, resulting in fewer banks in the region over time.
In what sectors are you observing the most potential for the growth of Brookline Bank?
Historically known as a commercial real estate lender, our strategy has involved originating large loans and selling portions to other banks. For example, with a $50 million loan, we may retain $20 million and sell off the remainder to other banks, allowing us to generate income from fees, as well as provide a way for us to originate bigger deals for our clients, while expanding our lending capacity.
Recently we’ve entered markets for nonprofits and educational institutions. We were fortunate to acquire a team from Century Bank that specializes in these sectors, which I believe will be leading growth areas.
How are you adapting your services to meet the changing needs of your customers?
The biggest concern for all regional and community banks after the SVB failure was maintaining deposits. To address this, Brookline Bank instituted a deposit-focused program. Because the demand for loans was low at the time, every employee at the bank had regular calls with me to discuss how best to retain and attract “sticky” deposits, those that are less likely to be moved by customers. This included personal checking accounts and cash management services for businesses.
How does Brookline Bank prioritize attracting and retaining the best talent?
Finding talent remains a challenge. While the banking industry’s current consolidation has eased recruitment slightly, Brookline Bank focuses on creating an empowering environment with minimal micromanagement. Pay and benefits are market-driven, but the bank emphasizes a culture of empathy and collaboration across departments and with clients.
How is Brookline Bank investing in technology to improve efficiency?
Technology is critical for us. Our highly-rated consumer online banking platform has been a success due to investment in our core processor’s solution, which is Jack Henry’s Banno. On the commercial side, we have been open to partnering with other fintechs to meet the evolving needs of our clients, though our intent is not necessarily to be a cutting-edge developer.
Are there any regulatory changes you are keeping an eye on?
Regulatory challenges are always present. Brookline Bank is preparing for new regulations, such as Section 1071 of the Dodd-Frank Act, which requires the collection of extensive and sometimes overly-intrusive data from small businesses. Another example is the new Community Reinvestment Act regulations that total 1,500 pages and present a significant legal and operational burden to banks.
How does Brookline Bank give back to the communities you serve?
Although we no longer operate a charitable foundation, Brookline Bank contributes approximately $800,000 annually to community initiatives. Banking is an industry that uplifts the community through promoting economic growth. I am personally involved in boards such as Supportive Living, Inc., which assists people with traumatic brain injuries, and the Main Streets Foundation, which supports small businesses across 20 Boston neighborhoods.
What is your overall outlook for Brookline Bank?
We want to remain independent. Over the years we’ve made acquisitions that have helped us to grow. In terms of structure, we have a holding company, Brookline Bancorp., which owns Brookline Bank, the lead bank, plus Bank Rhode Island and PCSB Bank in New York. We also have a subsidiary finance company that operates out of New York City. We always want to have our eyes open in the event that an interesting opportunity arises, and this strategy has worked for us for 150 years.
What are the bank’s priorities for the next two to three years?
Over the next few years, we intend to continue providing excellent service to our customers, attracting deposits and differentiating ourselves from larger, impersonal banks. The top five banks in Massachusetts control 40-50% of the market, but Brookline Bank’s focus on relationship banking is key to our competitive advantage.