Last Bankers Standing - Westfair Communications

Walden Savings Bank may not the biggest lender in the United States, says its Senior Vice President Gill Mackay, but it is one of the Hudson Valley community banks that showed a profit in 2008, “something we”™re very proud to report to the people who live and work here.

“You hear so much about the big banks, that no one is lending, they are in dire straits, etc., etc., etc., but we had our best year last year,” said Mackay, pointing to Walden”™s 2008 net income of $2.8 million. “I”™m sure if anyone”™s checked with other local community banks in the area, they”™d find they are continuing to lend. Community banks didn”™t get into exotic loans and that”™s why we have not taken the bite they have. We stuck to conservative lending practices, and they”™ve paid off for us.”

Since Walden is a mutual savings bank, “it is owned by the depositors,” said Mackay. “We don”™t have to be concerned about stock prices going up: surplus stays with the capital account of the bank and continues to be leveraged and loaned to the public. We are trying to work with the individuals who got stuck in the subprime market and are upside-down in their mortgage. We see if we can help them and if we can, we do…that is one of the nice things about dealing with a community bank. We can directly address our customers and do what we can.”

In some cases, Mackay says the situation is hopeless. “For people who used their house as a cash register, and kept running up the tab, refinancing and refinancing until there was nothing left, they reached the point of no return. Unfortunately, there is no where to go. Either they walk away from the home or just live in it.”

Walden, which has been an Orange County mainstay for more than 125 years, intends to keep on going with the same banking principles it stuck to when the market was wild, said Mackay. “A few years back, we sat and watched larger banks loaning at 125 percent of the home”™s equity. The bottom line was that we would not try to compete. Thanks to staying away from the temptation, we still have our jobs and we still have a viable bank.”

Mackay doesn”™t expect the economy to turn around anytime soon. “There is barely a market that this recession has not touched. People are not going out to restaurants nearly as often as they used to, which means that restaurants are not hiring as many people.

“That also means there are less people out there who might stop and buy something on the way to having dinner out. I think we are going to see a big downturn in the commercial real estate market. There are more and more strip malls with more and more empty storefronts. That can”™t be good for business and it hurts the businesses around them.”

For a fix, “I think the stimulus package will help the economy, but it”™s certainly not a silver bullet,” said Rick Jones, executive vice president, business services at Provident Bank, headquartered in Montebello. “One third is tax cuts, the other two thirds is spending. It”™s certainly an attempt to get things right, but its not going to get us ahead of the doldrums as quickly as people think.”
Jones said that everything is about execution.

“This is not going to solve the problems the banks are having,” Jones said. “There are 8,500 banks in the U.S. and not one is not impacted somehow.”

Jones said Timothy Geithner, secretary of the Treasury, needs to follow through with a solution to what he deemed, “the foreclosure mess.”

“There are trillions of dollars sitting on the sidelines just waiting to get things moving,” Jones said. “They won”™t do anything until they fix mortgage-backed securities.”

Jones said that if they aren”™t fixed, “we”™re spiraling downward.”

“Geithner needs to stop the spiral from getting deeper. People think banks make all the loans, but only 25 percent of mortgages are made by quote-unquote ”˜banks.”™ Others are made by what we call ”˜other financial institutions,”™” Jones said.

Provident Bank, a full-service, independent community bank, was founded in Spring Valley in 1888. It maintains 31 Hudson Valley branches, with 11 in Rockland County and 15 in Orange County.

While “downsize” may be the word of the day, People”™s United Bank is actively seeking acquisitions in the Maine to Washington, D.C., corridor. As for expansions in Westchester County? Plan on it.

Stephen Shealy, vice president and market manager for People”™s United Westchester County market, said the acquisitions could “certainly bring us into other areas in the tri-state region.”

“We”™re looking to continue to expand in Westchester and add new locations in Westchester,” he said.

“When some banks were doing loans we thought didn”™t make sense, we allowed the business to go elsewhere,” Shealy said. “We”™ve always done prudent, sound loans ”¦ when our industry threw standards away, we did not follow.”

People”™s United Bank is headquartered in Bridgeport, Conn., and has $20 billion in assets.

People”™s United Bank president and CEO Philip Sherringham said the regional bank”™s mission has always been to gather deposits in the community and to make prudent loans with those deposits.

“We never saw the rationale in making such loans,” Sherringham said, commenting on subprime lending. “Why should any bank risk its capital on loans to ”˜subprime”™ customers who are statistically unlikely to repay them?”

The logic behind what People”™s United calls “conservative banking,” appears to have served it well. “Many troubled banks are reaping what they sowed. They loosened their credit standards, made loans they shouldn’t have made and are now paying the piper,” Sherringham said. “As a result of our strong financial picture, we now find ourselves in the enviable position of being able to cherry-pick customers from our competitors who are reluctant or unable to extend financing, no matter how good the credit may be.”

“Right now the early part of ”™09 is shaping up a lot like ”™08,” said Kevin T.Timmons, Glenville-based treasurer of TrustCo Bank Corp., which has more than 100 branches in Westchester as well as the Hudson Valley. “There are some difficult conditions, but we remain strong financially and believe we will be able to continue to be successful in our business.”

For 2008, TrustCo”™s net income was $34.1 million, down from $39.5 million in 2007.

“That reflects that the industry was hit by a lot of very negative events during 2008,” Timmons said.

Three factors put together resulted in decline in profitability for 2008, Timmons said.

”¢ “a few more bad loans in 2008 than in 2007,”

”¢ “our expenses were up,” and

”¢ “net interest margin was down.”

“We actually did not get hit by the credit losses that most banks experienced,” Timmons said. “One of the things about Trustco, we have always maintained an extremely high level of liquidity. In markets like we”™ve experienced in 2008 having plenty of liquidity is a huge benefit and a significant characteristic of our bank.”

TrustCo”™s 2008 return equity for the year was 13.3 percent. Timmons said in peer groups, the return equity average is around 4 percent.

“Our profitability, although down, remains well above the industry average,” Timmons said.

In terms of subprime and toxic assets, “we are not exposed to that,” Timmons said. “Our primary business is very traditional home mortgage funding.”

A stimulus package will have little effect on 2009s bottom line, Timmons said. “I think you really have to see the home prices begin to stabilize before you start to see banks like us have a big pick-up,” he said.

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Kelly Liyakasa and Mary Sue Iarocci contributed to this story.