Market share falls at state's biggest banks

The largest Massachusetts banks lost market share last year, according to the latest federal statistics, as small and midsize banks appeared to pick up customers dissatisfied with rates and fees at bigger competitors.

Deposits kept by the state's largest bank, Bank of America, fell to $32.9 billion as of June 30, down from $33.8 billion at the same point a year ago, according to data recently released by the Federal Deposit Insurance Corp. Bank of America's market share was 18.2 percent, down from 19.3 percent a year earlier, the agency said. Other big competitors, including Citizens Bank of Massachusetts and Sovereign Bank, also experienced market share declines.

Bank of America and Citizens executives disputed the figures and said they don't reflect their overall assets, including brokerage accounts, mutual funds, and other products that aren't insured by the federal agency and therefore are not included in its totals.

Others, however, said the figures reflect the growth of companies capitalizing on customer frustrations with the largest institutions. "You'll find a number of midsize banks are rushing to fill the void we believe is being left in the marketplace as all these big banks get bigger," said Kim Meader, executive vice president of Salem Five, a state-chartered bank in Salem.

His institution had $1.7 billion in Massachusetts deposits as of June 30, or 0.95 percent of the market, up from $1.6 billion, or 0.92 percent, a year earlier. Meader described the rates Salem Five pays on checking accounts and certificates of deposit as "middle of the pack" compared to other banks.

But it has taken other steps that are attracting more business, such as opening new branches in Beverly and Woburn and reimbursing customers for all fees they pay for ATM transactions on other institutions' networks. Other banks that grew last year also have building campaigns underway, he said, such as Danversbank, whose deposits grew to $972 million from $914 million a year earlier.

Deirdre Cummings, the legislative director of the Massachusetts Public Interest Research Group, a consumer group, said she's heard anecdotal evidence that frustration is driving the growth of midsize institutions. "They're gaining on having lower fees, some higher interest accounts, and perhaps better service," she said.

In all, the FDIC counted 2,177 institutions managing $181 billion in Massachusetts as of June 30, up from 2,158 institutions managing $176 billion a year earlier.

RBC Capital Markets analyst Gerard Cassidy also cautioned that the numbers can be skewed by internal bank decisions to assign deposits to certain geographic locations to get tax credits or other benefits. But the figures seem to show growing competition to the largest bank institutions, he said, both from smaller local banks and from online competitors such as HSBC.com and INGDirect.com, both foreign owned.

Nationwide, perhaps the most significant point in the FDIC reports was figures showing Bank of America's total deposits account for 9.9 percent of all US deposits, including assets it is acquiring with its purchase of LaSalle Bank in Chicago, according to analysis by research group SNL Financial in Virginia. This moves the bank up against the federal limit of 10 percent, beyond which it cannot grow by acquisition.

Bank of America spokesman Ernesto C. Anguilla said the FDIC's data "is not an accurate reflection of our real business performance," partly since the agency doesn't include assets such as the bank's Columbia mutual unit. Adjusting for those assets, the bank's retail deposit share in Massachusetts rose to 20.7 percent from 20.4 percent, he said.

Citizens Bank spokesman Michael Jones said total consumer deposits increased in Massachusetts and nationally, both rising 15 percent since last year. The FDIC's numbers are different because they don't include money Citizens holds in so-called sweep accounts used by many business customers that pay higher interest.

A Sovereign spokeswoman said the bank couldn't comment on the figures because of a pending earnings report.

Ross Kerber can be reached at kerber@globe.com.