Banks buoyed by commercial lending

GROWING PORTFOLIO: Bank Rhode Island had 14 percent growth in commercial lending in 2012. Pictured above are, from left, Bank Rhode Island Senior Vice President of Commercial Banking Manny Barrows, President and CEO Mark Meiklejohn and Senior Vice President and Director of Retail Banking Steven Parente. / PBN PHOTO/RUPERT WHITELEY
GROWING PORTFOLIO: Bank Rhode Island had 14 percent growth in commercial lending in 2012. Pictured above are, from left, Bank Rhode Island Senior Vice President of Commercial Banking Manny Barrows, President and CEO Mark Meiklejohn and Senior Vice President and Director of Retail Banking Steven Parente. / PBN PHOTO/RUPERT WHITELEY

Local banks of all sizes are edging up on the optimism scale, buoyed at least in part by profits tied to substantial increases in commercial lending in 2012.
Bank of America Corp. initiated $65.5 million in total new-loan production for small business in the Ocean State last year, a 78 percent increase from about $37 million in total loan production initiated during 2011, according to bank spokesman Donald Vecchiarello.
“It certainly is a very large increase in Rhode Island and stands out, even amid our very positive 28 percent growth in new loans we had for small business throughout the country,” said Vecchiarello, based in the bank’s Charlotte, N.C., headquarters.
Bank Rhode Island, The Rockland Trust Co. and The Washington Trust Co. were among the other banks to report strong growth in commercial lending locally due to pent-up demand and a reviving economy.
The reasons Rhode Island rose so far above the national growth rate in Bank of America’s small-business loans aren’t immediately apparent, Vecchiarello said. The bank added 1,000 bankers across the United States who have expertise in working with small business, with four of those in Rhode Island.
“I think the reasons we saw significant growth in Rhode Island are that we’ve hired more small-business bankers and the economy is starting to turn,” he said.
The loans were typically for businesses with $20 million or less in annual revenue, he said.
Bank of America understands the value of having local bankers active in the community and serving Rhode Island businesses, he said.
“They’re not sitting in banking centers. They’re out and about meeting with people at their places of business,” Vecchiarello said. “They’re not waiting for people to come to see them.”
Bank of America is not alone in its position of being a big bank increasing small-business lending.
In January, small-business loan-approval rates at banks with at least $10 billion in assets increased to 15.3 percent, up from the 14.9 percent rate in December 2012, based on the Biz2Credit Small Business Lending Index, a monthly analysis of 1,000 loan applications, according to Biz2Credit.com “It appears that big banks are back into the small-business lending. Sovereign Bank, CitiBank and Citizens Bank have been particularly active. This is good news for small businesses in search of capital,” said Rohit Arora, Biz2Credit co-founder and CEO, who oversaw the research. “The big banks can no longer just sit on their assets. They are lending again, and this is how it should be.”
In Rhode Island, the upswing in commercial lending has been spread across a variety of sectors.
“We had very solid growth in 2012 in all of our areas – commercial and industrial, small business and commercial real estate,” said Bank RI President and CEO Mark Meiklejohn.
Bank RI had 14 percent growth in commercial lending across all sectors in 2012, including health care, manufacturing and nonprofits, he said.
“That’s terrific. It’s the strongest number we’ve seen in years,” Meiklejohn said. The 2012 increase is up from modest growth of 2-3 percent in 2011, he said.
“I think there has been some pent-up demand, and I think a lot of business owners have been on the sidelines for a few years,” he said. “Now I think a lot of businesses are feeling more comfortable about expanding or hiring. I wouldn’t say people are feeling hugely optimistic, but compared to where we’ve been for the past few years, there is a bit of optimism.”
The sense of optimism is good for the state’s overall business climate and the outlook for 2013, Meiklejohn said.
“We had not expanded for several years prior to 2012,” he said. Bank RI added one new branch in 2012, in Coventry.
“We thought it was time to add the Coventry branch. That’s a very good market,” Meiklejohn said. “I think we’ll continue to have positive news. We will be adding at least one new branch in 2013, possibly two.”
In its region that covers Rhode Island and the south coast of Massachusetts, Rockland Trust also saw substantial growth in commercial loans in 2012 – nearly 12 percent – about equal to the growth in 2011, said Senior Vice President and Regional Manager Jim Rizzo. “I think our presence in Providence has helped propel the substantial growth over the past two years,” Rizzo said. Although the bank had been working in the Rhode Island market, Rockland Trust opened an investment and commercial-lending office in the GTECH Center in Providence in October 2011.
“The big driver for our Rhode Island office is in niches. The health care niche was very strong for us in 2012, especially in assisted-living and skilled-nursing facilities,” Rizzo said.
“Another niche for us is in commercial real estate development, with an emphasis on multifamily housing, as well as substantial development in the Allens Avenue corridor,” Rizzo said.
“There’s been pent-up demand in Rhode Island in terms of commercial markets that haven’t been serviced by the larger banks,” Rizzo said. “Our focus has been on larger to mid-sized developments, because they tend to have the staying power that was needed to get through the last several years.
“We’ve been financing substantial projects in the hospitality market as well, including a hotel in Middletown,” he said.
Moving into 2013, Rockland Trust announced in January the approval of a $20 million line of credit for Newport-based Embrace Home Loans.
“The line is a working-capital facility. However there are multiple opportunities, including funding acquisitions, which we see this leverage as bolstering our negotiating and expediting any possible transaction,” said Embrace Home Loans President Kurt Noyce.
Noyce said a bank’s efforts to zero in on the needs and vision of the customer go a long way toward securing a long-term relationship.
“We spoke to dozens of institutions, from the largest national banking centers to the most-recognized Wall Street firms, and amongst all of them, Rockland by far took the time and energy to get to know our business, and our people,” Noyce said. Washington Trust also saw strong growth in commercial lending in 2012.
“Our commercial-lending area posted [11 percent] growth in 2012, which is quite an accomplishment in a slow-growth market,” said Washington Trust Chairman, President and CEO Joseph J. MarcAurele.
That 11 percent was growth of $128 million in commercial loans, with mortgages making up more than half the total, he said.
“We’re taking advantage of the robust commercial real estate market in Massachusetts and Connecticut,” MarcAurele said. “I also think Rhode Island is getting better. We’ve gone from just stabilizing to starting to see some growth, and some optimism, particularly our small- and middle-market customers, who are mostly the owners of businesses.”
“We’re starting to see a little more investment, and we’re hoping that continues,” MarcAurele said.
“We’ve continued to hire commercial banking talent from larger institutions in recent years, and they’ve produced for us,” MarcAurele said. “In 2012 we booked a good mix of new commercial real estate and commercial and industrial loans at the expense of our larger competitors. We’ve built solid relationships with these clients, by also providing cash management, deposit and merchant services.”
“In recent years the bank has increased its focus on middle-market lending to get the message out that Washington Trust has very experienced commercial bankers and the bank can do larger transactions, up to $20 million,” said Jim Hagerty, Washington Trust vice president for commercial lending. The bank has made significant investments in technology, products and people that are similar to what larger banks offer, he said.
Moving into 2013, Hagerty said Washington Trust is anticipating another strong year for commercial lending.
“Activity levels are fairly good, particularly for the first quarter of the year, which generally tends to be a lull,” said Hagerty. “It’s still fragile in Rhode Island, but there is growth and the tone is positive.” •

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