Some little guys keep growing

After years of big gains fueled by low interest rates, some of Massachusetts' smaller banks continued to grow rapidly in 2004 while others may have hit a plateau.

The state has no more giant publicly traded banks since Bank of America Corp.'s $48 billion acquisition of FleetBoston Financial Corp. last year. But it does have more than a dozen publicly traded smaller banks, some of which are enjoying booming growth.

Boston Private Financial Holdings, a Boston wealth management company, saw its revenue increase 44 percent last year, to $229 million, and its net income jump 54 percent, to $33.6 million. The increase came despite increased competition: Bank of America decided to base its global wealth and investment management division in Boston after acquiring Fleet. And another large bank, Wachovia Corp. of Charlotte, N.C., said last year that it would acquire a Waltham wealth advisory firm, Tanager Financial Services Inc., increasing its Boston presence.

Even so, Boston Private has kept growing, thanks in part to its specialization in targeting wealthy clients. The narrower focus helps the company build stronger relationships with individual clients, said president Walt Pressey.

''Competition always has been very strong in this marketplace," Pressey said. ''The clients make the determination based on who they feel is their trusted adviser."

A handful of other Massachusetts banks showed double-digit earnings growth last year, as well, including Westfield Financial, Slade's Ferry Bancorp of Somerset, and Brookline Bancorp. But as rising interest rates depressed demand for mortgages and loans, many, including Massbank Corp. of Reading and Woronoco Bancorp Inc. of Westfield, suffered declines in net income last year.

Massachusetts' small banks are also facing more competition from the state's larger banks, which are focusing more on customer service and offering all manner of free gifts, from iPod digital music players to $100 cash bounties, to customers who open accounts. In the last four years, New England's four biggest banks have grown to dominate half the market, up from 36 percent in 2000, according to Federal Deposit Insurance Corp. data in a sample of 10 Massachusetts counties.

The growing pressure from big-bank competitors and interest rate impacts on profits has reversed the run-up in stock prices many small banks enjoyed in recent years, as investors speculated they would be acquired for rich premiums. Slade's Ferry saw its stock fall by 10 percent during the year that ended March 31, while the stock of Wainwright Bank & Trust Co. of Boston fell 14.7 percent and Central Bancorp of Somerville fell 20.6 percent.

Also, industry executives say, share prices for little banks had gotten so high that the bigger banks stopped buying, waiting for share prices to fall.

William Ryan, chief executive of TD Banknorth Inc. of Maine, said the new economic and market climate for smaller banks has given ''everybody a little bit of religion" about prices they can expect to receive if sold. Over the last several quarters, TD Banknorth, a serial acquirer of smaller banks, including Cape Cod Bank & Trust Co. and BostonFed Bancorp Inc., has largely held off on deals.

But with smaller banks under increasing pressure as interest rates rise, Ryan said he sees potential to acquire more this year, especially in Massachusetts, Connecticut, and New York City. ''I think we'll see more opportunities in the next year," he said. ''It's going to take some work, but we're up for it."

Sasha Talcott can be reached at stalcott@globe.com.