Loan drought continues

Fairfield County community banks increased small business lending by less than $11 million last year ”“ ironically about the amount that the federal government funneled to BNC Financial Group Inc., which was the runaway leader in increasing small business lending in 2011.
Community banks in Fairfield County loaned small businesses just more than $950 million last year, according to data from the Federal Deposit Insurance Corp., a 1 percent increase even as the economy began to pick up steam in the second half of the year.
The Connecticut General Assembly is currently considering a bill that would seek to boost small business lending by allowing the state treasurer to buy the guaranteed portion of federal Small Business Administration loans extended by state-chartered banks and backed by the federal government.

The bill would free up to $1 billion for the program from the state pension fund. The bill would also allow the state to pick up $4 million of SBA loan fees over two years.
“(A) secondary market allows them to sell off up to 80 percent of the loan, thereby freeing up those monies to lend back into the communities they serve,” Tom Mongellow of the Connecticut Bankers Association told a legislative committee last month. “We have consistently brought up the SBA lending program, with its guarantee and its secondary market, as an excellent model to emulate on the local level.”
For its part, BNC Group was already ramping up small business lending significantly when it was accepted into the U.S. Department of Treasury”™s Small Business Lending Fund, which provided $11 million more for BNC subsidiaries Bank of New Canaan, Bank of Fairfield and Stamford First Bank.
Danbury-based Union Savings Bank was the only other local community bank to increase small business loans last year by a double-digit percentage. CEO Jay Lent referred questions to Peter Maher, the company”™s chief lending officer.
“By far and away the most important metric is cash flow ”“ ability to service the debt,” Maher said. “If you have the demonstrated cash flow, you are in pretty good shape to get the loan, assuming you have good credit.”
Bernard Sweeney, SBA”™s senior district director in Connecticut, is not so sanguine on credit availability in 2012.
“Banks are demanding high credit scores because the federal regulators are standing over their shoulders questioning poor credit risks,” Sweeney testified last month before a legislative committee. “We will never again see the days when a banker will drive out to your business and hand you $50,000 without making so much as an application.”
Statewide last year, Connecticut banks had nearly $1.1 billion less money on the streets in the form of loans, compared to in 2010. Banks increased their net loans as computed as a ratio to total assets, however, and loans outstanding increased by $830 million in the fourth quarter, offsetting a far steeper drop as of the third quarter.
The lower annual lending figure came even as banks improved aggregate profits 37 percent to just short of $500 million, their highest total since 2007.
Those profits came at a cost ”“ Connecticut banks cut 840 jobs last year, with People”™s United Financial Inc. reducing the size of its Northeast workforce by more than 160 jobs in the fourth quarter, even as its buys up tristate area branches of Citizens Bank.
People”™s United still employs more people than it did a year ago, thanks to a small succession of acquisitions in Massachusetts and New York. It reported having about 4,800 full-time employees and nearly 700 part-timers at the end of 2011.
Banks”™ statewide employment of about 14,000 people this year remains well above the some 12,500 workers they reported to FDIC in 2007.