QB&T in the News

October 11, 2011

Riding Out the Storm

by 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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