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October 11,
2011 Riding Out the Stormby
Felicia Hunter,
Conntact.com
"Connecticut's Business Address" Area
banks large and small adapt to challenging times and wait for better ones
In economically challenging times, businesses
and individuals alike often turn to financial institutions to help them stay
afloat until difficult monetary seas become somewhat more peaceful. But
those financial institutions are riding the same rough waves as the clients
they serve. What helps keep them above water? “The current environment is precarious for banks — both large and small,”
says banking analyst John Carusone of the Hartford-based Bank Analysis
Center. “Profits are under pressure because already tight net interest
margins are being squeezed further due to the flattening of the yield curve.
The soft economy and the threat of a further recession is lessening loan
demand and creating deteriorating credit quality.”
Regulators also play a role, says Carusone — sometimes sending mixed
messages. “Regulators are pushing bankers to lend more but at the same time
admonishing them to observe strict underwriting criteria,” he explains. “The
stock market is pushing price-earnings ratios down and hence stock values
have generally been punished, alienating investors.”
At this time, says Carusone, smaller might be better. This holds especially
in light of the fact that a number of larger banks have imposed additional
fees in order to maintain revenue streams.
Carusone believes “It is a good time to be a community bank or a credit
union if you are profitable, well managed and have a strong capital
position. The retail banking public and small businesses are much more
willing to look to smaller institutions as a preferred alternative to larger
money center or regional banks that have struggled, who have received large
government bail outfunding or who are thinking of doubling up on already
unwelcome bank fees." Most of the smaller
financial institutions that are headquartered in Connecticut are equipped
with good capital positions and adequate reserves against potential loan
losses,” says Carusone. “But this varies institution by institution. Banks
with marginal positions who are just hanging on may well have to consider
partnering with a larger, stronger institution. So consolidation, although
happening at a slower pace, is still very much a factor on the near-term
horizon.” Below, several small, medium and
large banks are profiled and a few top managers weigh in on how their
clients — and how they themselves — are faring in the current economic
climate. Quinnipiac Bank & Trust Co.
Smaller is better, at least according to managers at Quinnipiac Bank & Trust
Co. of Hamden, whose service area is New Haven County. The independent
commercial bank was established in 2008 after Mark Candido and Richard
Barredo, current president and executive vice president, respectively,
sought to recapture the advantages of personalized community banking in the
midst of financial-sector expansions and acquisitions. In July the bank
reported its first profitable period, with a net income of $30,000 for the
second quarter of 2011. With the backdrop of the current economic climate,
that achievement is particularly laudable, “Conservative growth and
adherence to prudent underwriting standards has minimized loan losses and
enabled the bank to realize profitability sooner than expected,” the bank
stated. “The challenges remain to continue our growth and sustain and
increase profitability while effectively navigating through these turbulent
economic conditions.” The bank reported $69.3 million in total assets as of
June 30. While reporting a “moderate” loan
demand, the bank noted a $12.6 million increase in deposits over a six-month
period — up from $49.2 million Dec. 31, 2010 to $61.8 million at the end of
June. Having opened in the teeth of the recession, “We know nothing else but
hard times,” says Candido. He says a key to the bank’s success is that its
loan portfolio has “almost no delinquency. It’s negligible” — less than 0.25
percent. “I wanted to be with a small bank,” says Candido. Other employees,
many of whom come from larger institutions, feel the same way. “They like
the way we as management treat them.” And so
do customers, Candido adds. He cites, for example, a client who has been in
business three decades who switched to Quinnipiac because of the personal
treatment he receives. “We offer highly personalized, exceptional service.
Everybody says it,” notes Candido. “We have a lot of small to mid-sized
businesses, a lot of mom and pops,” he adds. As they slowly work through the
recession, many are looking to expand their businesses, says Candido.
“They’re purchasing more inventory and goods.” In addition, the bank is
seeing quite a bit of real estate-related activity, including “a lot of real
estate loans for owner-occupied properties. A good number of commercial
customers are owner-occupied, and they’re looking to refinance. Also, people
who are renters are looking to buy. They want the equity.”
As far as its lending practices are concerned, “We continue to look for
strong, viable businesses to lend to,” says Candido. The bank is looking
forward to moving into a new building next year, a move that “really
reflects a strong commitment to the greater New Haven community,” Candido
says, adding, “About two years into the new building we’ll probably start
looking to add locations.”
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