Belmont Savings Streaks To 16th Consecutive Quarter of Growth

Photo: Bob Mahoney, president and CEO of BSB Bancorp, Inc.

Everyone can appreciate a good “streak.” The Yankee Clipper Joe DiMaggio is still remembered for hitting in 56 straight games while the Boston Celtics won eight consecutive world championships in the 1950s and 60s, a record unlikely to be broken.

And you can add another familiar name to those holding impressive streaks as the parent company of Belmont Savings Bank, BSB Bancorp, Inc., announced recently it had achieved 16 straight quarters of increased earnings.

At the end of the second quarter on June 30, the bank’s net income reached $4 million, a 36 percent increase over the same quarter last year as strong loan creation and deposits drove the results. Since the beginning of the year, the bank reported net income of $7.7 million as compared to $5.5 million for the six months, a 40 percent jump.

“The bank’s success is due to our focus,” said Robert Mahoney, BSB’s CEO and president who since he was hired in 2010 has led the 132-year-old bank from a sleepy $400 million mutual savings bank into a stock-ownership holding company with $2.37 billion in assets, placing it in the top 400 banks – 376th to be exact – in the US.

“We created a road map seven years ago that has worked successfully in a terrific community with dedicated customers,” said the Wellesley resident who helped build Citizens Bank into a regional powerhouse in the early 2000s.

Unlike the recent trend of building through rival acquisitions or relying heavily on technology, Belmont Saving’s formula powering its growth is, well, boring; over the past seven years it has concentrated on writing mortgages on lots of residential homes and lend to commercial real estate ventures that fall in the bank’s Goldilocks range – not too big and not too small.

“We’re not into selling wealth management services or insurance or other financial products,” he said. ‘We decided back in 2011 to have a narrow view of where our growth would come from. I like the notion of controlling our own destiny,” said Mahoney.

And the numbers show it. Total loans – 1 to 4 family homes and commercial properties – grew by 11 percent comparing the first half of this year with last year to $201.6 million while deposits increased in the first six months to $1.61 billion from $1.47 billion.

What that vanilla portfolio produces besides earnings is safety: The bank’s total nonperforming assets have dropped to $1.7 million, or about three-quarters of one percent of total assets while outright net charge offs was $32,000 in the first half of the year. 

The four years of steady growth has rewarded bank shareholders with its stock price breaking the $30 barrier recently as total stockholders’ equity increased by $8.9 million to $169.8 million as of June 30.

Mahoney said matching the recent record of double digit growth will be harder to achieve as the bank continues to grow ever bigger – there are only so many home mortgages a bank can write in the competitive Metrowest market  – “so all I can do is focus on earnings since can’t control the other parts of the economy.”

But streaks, whether on the playing field or in business, can end suddenly if the person or organization doesn’t recognize potential roadblocks before them. The big one is a change in the national economy. Mahoney said he sees headwinds on the horizon, noting that the current economic recovery is entering its seventh year which is the usual length of financial rallies while other signs such as rental rates, occupancy and equity values that are “overheated.”

“It looks a lot like 1999, 2003 and 2007,” said Mahoney, reeling off the years the most recent of the downturns began.

Yet Mahoney doesn’t believe a decline, when it does come, will be severe, especially in New England with the economy driven by strong sectors such as biotech, medicine, universities and specialized manufacturing, saying “we are on a better ship to weather the coming storm.”

While bankers have well-honed strategies to ride out a downturn, there is a new and potentially greater threat to Belmont Savings and the entire banking structure: technologic disruption.

Like many industries, the banking sector is seen as a prime target for new tech-based firms that are looking to nimbly take advantage of an industry that they see as underserving their customers. An article in Inc. magazine points to startups that are “debanking” customers with mobile financial services. 

While recognizing the push towards technology creating fundamental changes to the industry, Mahoney contends banks such as Belmont Savings are meeting that challenge with apps and online services that are making a trip to a branch or the main office unnecessary and putting its customers in control.

“Amazon can’t transfer funds any faster than we can. And we have free ATM transactions around the world,” said Mahoney. Nor does he think that large firms such as Apple or Google will want to venture into the banking due to the burden of regulatory demands.

“If [the tech companies] think that dealing with the [Securities and Exchange Commission] is rough, they will not want to see the federal and state regulations we have to meet. That’s why, I think, they haven’t entered the business,” said Mahoney.

After engineering the bank’s multi-year streak, Mahoney said he isn’t ready to take the accolades and retire, who, at 69, is the same age as Aerosmith’s frontman Steven Tyler who is about to go on tour.

“I failed at retirement twice before so why try it a third time?” Mahoney said.

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