Loan growth drives profit at banks

COURTESY FIRST BRISTOL CORP. 
ROOM TO GROW: Rockland Trust is providing the financing for a 92-room Homewood Suites by Hilton in Middletown, shown above in a rendering.
COURTESY FIRST BRISTOL CORP. ROOM TO GROW: Rockland Trust is providing the financing for a 92-room Homewood Suites by Hilton in Middletown, shown above in a rendering.

For some banks, there’s no time like the present.
Less than fours years removed from the beginning of the Great Recession, financial institutions – especially those of modest size in comparison to the “too big to fail” institutions that precipitated the financial bashing of the world economy – are now investing in commercial ventures and in doing so are making a nifty profit.
“We’re seeing additional demand,” said James T. Rizzo, senior vice president at Rockland Trust Co., part of a continuing trend he sees in which smaller, regional banks are taking clients from larger, national banks as they fail to show the ability to service prospects.
“A good percentage of Rockland’s growth is from clients refinancing away from the larger banks,” Rizzo said. Based on current events he expects the trend to continue.
The numbers back him up. Independent Bank Corp., the parent of Rockland Trust, posted net income of $12.2 million for the first quarter of 2012, an increase of 8.9 percent from the 2011 first quarter. Total loans rose to $3.9 billion as of March 31, an increase of 8 percent over a year earlier, thanks to a 12-month increase of 8 percent in commercial loans.
Washington Trust Bancorp Inc. has posted record net income for three consecutive quarters, thanks in large part to its growth in commercial loans. The parent company of The Washington Trust Co. saw its total loans increase $8.2 million to $2.2 billion over the 12 months ended March 31, led by a $17.2 million increase in commercial mortgages.
Despite the expanding geography of its portfolio, however, with commercial loans going to Long Island and western Connecticut as well as closer to home, Joseph J. Marc-Aurele, Washington Trust chairman, president and CEO, expected a larger commercially based profit. “We saw moderate increases in our commercial loan portfolio in the first quarter, however demand has not been robust,” he said. He pointed to economic headwinds, increased regulations and competition for the bank’s loan performance. “We have had great success growing key business lines, especially our mortgage-banking operation and branch network, and we will continue to do that,” MarcAurele said.
“We had a very strong fourth quarter in loan closings and to a large extent, we ‘blew out’ a large portion of our loan pipeline.”
Demand has not been an issue with Rockland Trust, said Rizzo.
“We’re seeing an interest in hospitality-based as well as basic commercial real estate development. Apartment housing is also helping to drive demand, and we are also seeing increases over the industrial sectors.”
The bank is currently helping Mile One LLC in financing the Homewood Suites by Hilton, at 348 West Main Road, Middletown. The property is located directly across the street from three other hotels, the Residence Inn by Marriott, a Hampton Inn & Suites and a Howard Johnson Inn. Mile One is a partnership of two local firms, First Bristol Corp. of Fall River and Kempenaar Real Estates Inc. of Middletown.
“The midtier banks have been very strong and active, and appear to be well-capitalized,” said James J. Karam, president and CEO of First Bristol, a real estate development firm. His company is working on other projects, including a Super Walmart currently under construction, funded by Cambridge Savings Bank.
“The savings banks and the regional commercial banks have been very active. Rockland has been great to deal with, but there were other banks interested in the project. The interest is there,” Karam said. And it’s across large parts of New England. Waterbury, Conn.-based Webster Financial Corp., the holding company for Webster Bank, announced combined growth in commercial nonmortgage and commercial real estate loans of $81 million, or 2 percent, from Dec. 31 to the end of March, and $478 million, or 12.2 percent, from a year ago. That led to net income available to common shareholders of $38.3 million for the quarter ended March 31, compared with $39.6 million for 2011’s fourth quarter and $33.7 million for the year-earlier quarter.
“In the quarter our commercial loans, exclusive of commercial real estate, grew $29 million,” said Gerald P. Plush, senior executive vice president and chief financial officer. “[From last year], our middle-market and small-business loans, which are at the heart of our relationship-building strategy, grew a healthy 16 percent and originations were 40 percent higher than last year. Our commercial real estate lending is another bright spot.”
That’s no surprise, considering the company’s business strategy as explained during their first-quarter webcast by Chairman and CEO James C. Smith. “There has been a strategic shift from account acquisition, building deeper and more profitable relationships with customers across the company,” he said. The bank’s plan is to grow key middle-market industries and commercial real estate businesses by attracting seasoned, relationship-oriented bankers to come to work for Webster and appealing to a growing preference among consumers, customers and prospects to partner with a strong, regional bank. •

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