With weeks to go before authorization for a $30 billion small-business fund expires, New Canaan-based BNC Financial Group Inc. became one of the first two Connecticut banks approved to lend money under the program, getting $11 million.
BNC is the parent company for Bank of New Canaan, Bank of Fairfield and Stamford First Bank.
Through mid-August, less than a dozen community banks in the Northeast had received money under the Small Business Lending Fund (SBLF) program overseen by the U.S. Department of the Treasury, with Simsbury-based SBT Bancorp Inc. also approved for $9 million. As of mid-August, the U.S. Treasury had revealed some $1 billion in infusions nationally for the program and said additional announcements will be made in coming weeks.
Fairfield County community banks held steady the number of small-business loans outstanding, but as a group contracted the dollar amounts on the street by 2.7 percent, according to data from the Federal Deposit Insurance Corp.
That amounts to $21.4 million less spending power in the hands of area small businesses, a significant shortfall that one or two more Treasury department SBLF tranches would go a long way toward ameliorating.
A range of factors can play into swings in loan totals, including tightening credit standards, companies paying off loans or reducing lines of credit, banks working out problem loans on the books, overall business demand and banks poaching accounts from competitors.
Two banks that recently elevated new CEOs accounted for 75 percent of the dollar decline in local small-business lending: Fairfield County Bank, whose small-business loans outstanding dropped by nearly $11 million and First County Bank, whose totals fell by just more than $5 million.
In the case of Fairfield County Bank, the numbers were dragged down by about 50 fewer commercial mortgages on its small-business portfolio. While the Ridgefield-based bank added nearly 40 small-business loans to the books, it was not enough to push Fairfield County Bank”™s dollar totals anywhere near toward a gain from the first quarter. In July, Gary Smith retired as CEO of Fairfield County Bank, with the bank promoting then-president David Schneider as his replacement.
For First County Bank, the greatest decline occurred in its commercial loans totaling between $250,000 and $1 million, the uppermost range qualifying as small-business loans under the FDIC”™s criteria, where the Stamford-based bank had seven fewer loans totaling $2.3 million.
Rey Giallongo, who recently was promoted to CEO of First County Bank, said the uncertain economic environment is chilling demand for commercial loans.
“It”™s quiet,” Giallongo said. “We have a lot of liquidity. We are looking for loans ”“ it”™s really (a reflection of) consumer confidence and small-business confidence.”
Even Union Savings Bank, which undertook a significant first-quarter expansion in commercial mortgage lending, went into a holding pattern in the second quarter with 25 fewer loans in its small-business portfolio, though the Danbury-based bank registered a $670,000 increase in its dollar amounts outstanding to lead its peers.
The countywide decline follows a first quarter in which Fairfield County community banks increased their small-business lending by $33 million, and lends credence to surveys by the Connecticut Business & Industry Association and the Federal Reserve Bank of New York of tightening credit for small businesses.
In mid-August, the New York bank published a survey that suggested more than one in four small businesses in the tristate area are not applying for loans on the belief they will be turned down. In survey of 850 companies in the tristate area, the bank found that businesses that were successful in landing loans generally had sizeable revenues and collateral. Those that did not, however, did not feel emboldened to file an application, despite options such as Small Business Administration guaranteed loans some local banks offer to companies sporting a risky profile.
The bank suggested that most small-business owners are relying on earnings or existing personal wealth as a source of extra cash when needed.
