Several Fairfield County banks continue to have problems with commercial loans in workout situations, with several reporting increases in the number of borrowers unable to make interest payments on loans that have already been restructured.
Smaller community banks can suffer a disproportionately large impact from any single commercial loan that comes into a workout situation. In Fairfield County, no bank has suffered more on that front than tiny Wilton Bank. The bank lists $7.3 million in commercial loans previously restructured and still not accruing interest, representing nearly 10 percent of the total loans it has restructured, and with net loans and leases totaling less than $40 million today.
Danbury-based Union Savings Bank likewise saw a big increase in problem loans stuck in reverse, listing $10.9 million at the close of 2011, a more than fivefold increase.
And while the small Community”™s Bank had the biggest increase in beleaguered commercial loans, as computed as a ratio of total restructured loans, it was coming off a 2010 in which it had no issues on that front and so had far greater margin for error.
Patriot National Bancorp Inc. had by far the biggest improvement between 2010 and 2011, cutting its troubled workout loans by 0.3 percent. While Stamford-based Patriot National still had one of the four highest totals of Fairfield County banks, its improved fortunes got it nominated for a national “turnaround of the year” award by M&A Advisor, a trade publication.
And New Canaan-based BNC Financial Group Inc. and First Bank of Greenwich had no restructured commercial loans in non-accrual status in either 2010 or 2011.
JPMorgan Chase & Co. was among seven banks with a major presence in Fairfield County to cut down its double-whammy commercial loans, with the New York City-based giant saying it is increasing lending.
“Our customers are in excellent shape, speaking generally,” said Douglas Petno, a New Canaan resident who is head of commercial banking at JPMorgan Chase, speaking last month at the company”™s investor analyst day. “Many of our competitors right now are kind of off the field. They”™re working through problems.
“Customers I talk to have a lot of pent-up appetite to invest,” Petno said. “I think once you see sort of some of the bigger macro overhangs in the market start to clear up ”¦ that many small businesses are ready to build and to expand their businesses and add capacity. And that”™s going to happen eventually.”
Those problems continue even as community banks struggle to deal with the increased regulatory oversight under the Dodd-Frank financial Wall Street Reform and Consumer Protection Act. In a March speech to the Independent Community Bankers Association, Federal Reserve Chairman Ben Bernanke said he was mindful of the burden community banks are laboring under as they attempt to increase loans and revenue while grappling with Dodd-Frank.
“Community banks are ”¦ facing difficult challenges,” Bernanke said. “Their close ties to local economies are, on balance, a source of strength, but a drawback of those ties is that the fortunes of communities and their banks tend to rise and fall together.”
