Westchester, Fairfield banks cautious, opportunistic
It was a mixed first quarter for the banking industry ”“ FDIC-insured banks earned a total of $35.3 billion from January to March, up $6.6 billion from the $28.8 billion banks earned in the first quarter of 2011. But loan balances fell by $56.3 billion after three straight quarterly increases.
“The condition of the industry continues to gradually improve,” said FDIC acting Chairman Martin Gruenberg. “Insured institutions have made steady progress in shedding bad loans, bolstering net worth and increasing profitability. (But) the overall decline in loan balances is disappointing after we saw three quarters of growth last year.” Gruenberg did caution against drawing conclusions from one quarter.
Two-thirds of banks reported higher earnings. Ten percent reported losses, down from 16 percent a year earlier. The average return on assets, a measure of profitability, rose. But the flow of money into deposit accounts slowed.
Lower provisions for loan losses and higher noninterest income were responsible for most of the earnings gain. Banks charged off $22 billion in bad loans, down 35 percent from last year. But the percentage of loans and leases that were not current remained high by historical standards.
As for the decline in loan balances, credit card loans fell by $38.2 billion, residential real estate loans fell by $19.2 billion and home equity lines of credit dropped by $13.1 billion. Balances in construction and development loans declined by $11.7 billion. However, loans to commercial and industrial borrowers increased by $27.3 billion, and auto loans were up by $4.5 billion.
Gruenberg summed it all up this way.
“The improved financial condition of the industry has not yet translated into sustained loan growth. We will continue to watch this indicator closely.”
That”™s the national picture. What about community banks in Westchester and Fairfield counties?
“We are trying to be opportunistic when it comes to lending,” said John Ritacco, president and CEO of Community Mutual Savings Bank in White Plains. “As a small bank in a big market there are many opportunities to help small business. There is lending, but the market is not as robust as it used to be.”
As for the bank”™s lending standards, “We have stuck to the traditional forms of underwriting whether in commercial lending or mortgages. Traditional underwriting has stood the test of time for quite a while. We believe in continuing with those processes,” Ritacco said.
Daniel Berta, president of Fairfield County Bank in Ridgefield, said his bank isn”™t changing its lending practices either. “We were always cautious on lending, that helped us remain strong through the tough times. The word ”˜cautious”™ should go along with lending all the time.”
He said mortgage lending was up in the first quarter and continues to be with record low interest rates.
“And we”™ve seen a shift lately to purchases rather than refinances. It”™s hard to say if it”™s a trend.” He did mention though, that “the Westport market has seen more activity. It depends on the size of the house. In Westport we”™re seeing more activity at all different levels. In general though, the more reasonable homes, under $1 million, tend to be moving.”
John Tolomer, president and CEO of The Westchester Bank in Yonkers, N.Y., said lending “has risen dramatically. It appears that past due loans and foreclosures are beginning to stabilize.” Loans were up 46 percent in the first quarter. “Banks always face the question of whether it”™s better to lend it out or invest in Treasuries,” he said. “The low rates encourage banks to make loans.”