Community crossroads
With the weight of parent Royal Bank of Scotland behind it ”“ not to mention above it ”“ it took Citizens Bank only a few years to build a base of more than $21 million in deposits at a new branch at 600 Washington Blvd. in Stamford, where RBS has its regional headquarters.
It took little BNC Financial Group Inc. less than a year to nearly triple that total at its fledgling Stamford First Bank.
If BNC jumped at the chance to establish a new community bank in wealthy southern Connecticut last year, do not expect many others to follow suit anytime soon. Between a wobbly economy and onerous regulations spawned by the Dodd-Frank Act, investors remain leery about fronting the cash necessary to establish sufficient capital ratios under the federal Office of the Comptroller of the Currency, according to Jay Forgotson, CEO of BNC Financial Group Inc., which owns Bank of New Canaan, Bank of Fairfield and Stamford First Bank.
New Canaan-based BNC became the lone Fairfield County bank accepted into the U.S. Treasury”™s Small Business Lending Fund, giving it an additional $11 million backing to produce loans. Forgotson credited the bank”™s relationships with Stamford businesses for its new branch”™s ability to amass nearly $60 million in deposits right out of the gate.
“I think the government has to become more involved in the creation of community banks, because I hate to see the next recession when there are going to be half as many,” Forgotson said. “It”™s not set in stone, but the probability is in the not-to-distant future we will do a second branch in Stamford. ”¦ The vision is (Stamford First Bank) would not be on every corner, but that it would be on everyone”™s mind as the best commercial bank in Stamford.”
While banks continue to add branches ”“ Milford Bank opened its second Fairfield County branch the first week of October, at ShopRite in Stamford ”“ they are not doing so at the pace they were of a few years ago and startup de novo banks are now an endangered species, with none opening in Fairfield County since Bank of Fairfield in 2008. As reported by the Hartford Business Journal, organizers of Sachem Bank pulled their application to create a new community bank serving Madison and Branford, blaming the economy”™s impact on raising capital, despite CEO Michael Flynn”™s experience on that front as the former CEO of Westport National Bank.
In a poll published by the Connecticut Business and Industry Association and Stamford Chamber of Commerce, however, only one in five Fairfield County companies surveyed cited lack of capital or financing as an obstacle to expansion locally. About half blamed the cost of doing business in Connecticut, including taxes and regulations, and about 40 percent cited a lack of customers or competition.
“We were hopeful that 2011 was going to be the year of growth,” said Jack Condlin, CEO of the Stamford Chamber of Commerce, in a prepared statement. “The first half was encouraging, but the third quarter took the wind out of our sails.”
Community banks are hoping to get a lift from the Communities First Act recently reintroduced in the U.S. Senate, which would considerably lighten the regulatory and audit burden they currently face. With banks continuing to fail, however, including one in New Jersey that was acquired earlier this month, it is uncertain what they can expect from a bill that has failed to move forward in varying forms since 2005.
If the federal government cannot help, Forgotson said, there is ample capacity for state government to do so, even as Gov. Dannel P. Malloy suggested in Stamford last week that he would focus on small-business financing as part of a jobs bill he plans to craft with the Connecticut General Assembly. A previous assembly bill to expedite the formation of new banks did not produce results.
“I think one of the things they could do is get down here, talk to us, and get more money into the small businesses,” Forgotson said.