Since the financial crisis of 2008, regulatory agencies have placed stricter standards on banks regarding due diligence, compliance and reporting. The new regulations have made operating a bank more cumbersome and expensive, those in the industry say, and commercial lenders are impacted by investing greater time and money to comply.
All commercial lenders have been hit by the compliance and regulation costs, but in Fairfield County the economic downturn has kept small to midsize companies from requesting loans for years, stifling the growth of commercial banks”™ loan portfolios said Rick Zaremski, business banking division senior vice president at First County Bank. Six years ago, both the residential and commercial loan portfolios were negatively impacted by the recession with high unemployment and declining real estate values, he said.
But in the past two years, business confidence has risen and companies are starting to reinvest in economic development projects. First County Bank, a 160-year-old mutual bank that serves mostly family-owned businesses and companies earning revenues between $10 million and $50 million, has grown its commercial and residential loan portfolios between 9 percent and 10 percent each year for the past two years, Zaremski said.
An upswing in the housing market and job creation has helped boost First County Bank”™s loan portfolio, Zaremski said. In Stamford, the improving housing market and rising business confidence have created a surge in loan requests particularly from apartment and condominium developers, he said.
“The apartment market in Stamford has really developed and continues to be developed,” said Zaremski. “A few developers recently came to us with a request for condo construction. As the real estate market improves developers are seeing there”™s no new housing product out there, so there”™s an opportunity to make some money in that market.”
Although the recession has impacted all industries, and many were subject to the “survival of the fittest” mode of existence, one company in particular has made a strong comeback in Stamford. A luxury sporting goods company, through making strategic changes internally, has repositioned itself to beat out its retail competitors, Zaremski said.
“They did what they had to do to survive,” Zaremski said. “They made it through the recession, and they”™re coming out stronger because their competitors have gone by the wayside and they were able to pick up all of the customers that were out there.”
Meanwhile, First County Bank, which has 15 branches in Fairfield County, is noticing that smaller mutual banks are declining in number.
“As banking gets more complex and compliance costs rise, you”™ll see some of the smaller banks merge or go away,” Zaremski said. “You”™ll see that for a small bank that has one branch and that”™s it, it”™s hard to survive with all the costs out there to keep it open.”
But the benefit of a mutual bank is that unlike publicly-traded banks, it doesn”™t have to hit an earnings number every quarter, Zaremski said. So the focus is more on customer relationships and maintaining regular costs that go into compliance and audits.
“Typically, a mutual bank can take a longer view towards many things, including how we handle our customers and profitability,” Zaremski said. Whether for new equipment, construction or mortgages for a commercial property, the market for bank loans is growing more ripe, he said, noting small- and mid-sized businesses are reinvesting in their companies again.
“People are starting to feel that the recession is behind them, and it”™s an opportunity to move forward,” Zaremski said. “Interest rates are still low all across the board, and every bank has favorable rates. It”™s very competitive out there.”
Despite similar rates and products, what keeps First County Bank a competitive player in the cut-throat commercial banking industry is its long-term relationships with its clients, said Earl Tripp Moore, a business banking division vice president at First County Bank.
“We”™ve been in the market a long time,” Moore said. “A certain percentage of our clientele appreciates the relationships that they developed here and they know they”™re going to last for a lot of years. That adds some value to our company when a lot of products and rates offered at other banks are the same.”
Moore and Zaremski have been in the banking industry for decades and worked with small and large banks. Both agreed that First County”™s emphasis on providing financial support for nonprofit organizations that help with community development projects allows the company to maintain positive relationships with residents in Fairfield County.
“You feel like you”™re really part of the fabric of the community and see the impact of the services you provide and relationship you build and see that out on the market on a daily basis,” Moore said. “There”™s been a lot of pain out there for a lot of years, but it”™s good to see businesses recovering. Times are getting better, and we”™ll never stop lending.”
