Hartford Business Journal

18 Hartford Business Journal • April 6, 2020 • www.HartfordBusiness.com By Matt Pilon mpilon@hartfordbusiness.com C onnecticut's sixth largest bank offers a window into what lenders here may be facing in the months ahead, as the COVID-19 coronavirus severely im- pacts the lives and operations of many business and consumer borrowers. At Naugatuck-based Ion Bank, CEO David Rotatori says borrowers representing about $90 million in loan balances have come forward to ask for loan modifications as they struggle from the financial fallout of the virus. That's about 10% of Ion's entire book of Connecticut loans, and the ratio is only going to rise — perhaps to as high as 30% — as the outbreak contin- ues to sideline businesses and workers. Like Ion, many Connecticut banks and credit unions have been eager to play a benevolent role in the ongo- ing coronavirus pandemic, waiving late charges and other fees, launch- ing low-interest emergency lines of credit and working with borrowers to modify loans or delay payments. That spirit of solidarity culmi- nated in a March 31, pact signed by 60-plus lenders pledging to offer up to three months of mortgage relief for homeowners who have been impacted by the crisis. "Financial institutions have been working proactively with borrowers right from the get-go," said Thomas S. Mongellow, president and CEO of the Connecticut Bankers Association. "If we do our job right, we're going to keep everybody financially se- cure," said Bruce Adams, CEO of the Connecticut Credit Union League. That flexibility, however, can't last forever. The longer Connecticut's economy is in partial quarantine, the greater risk that borrower accom- modations could eventually stress institutions' financial strength. The federal government's $2-tril- lion stimulus package, which includes low-interest loans for employers that maintain their payrolls through the crisis, as well as modest checks for consumers, should help many bank and credit union customers meet some of their short-term finan- cial obligations, though S&P Global says it won't be enough to stave off a recession, the length of which is anybody's guess. If the stimulus doesn't provide the desired economic shot in the arm, or if COVID-19 hangs around late into the year or lon- ger, some wonder how many more bullets Congress might have in the chamber. At some point, lenders may have to tighten their standards in order to protect their own financial health. "It's one thing to not have earn- ings, it's another to start taking [loan] losses where we start to eat into the capital," said Rotatori, whose bank has $1.36 billion in assets. "I think the government can support two to three months, but if it goes to six, eight, 10 months or a year, at some point you're going to have serious issues. There's only so much the government can pump in." Rotatori said he's calm about the situation for now because his bank is well capi- talized, and even though he could be facing losses for the year, his largest borrowers are relatively strong. Stimulus demand In the coming weeks, banks (and some credit unions) will play a central role in connecting small businesses with approximately $350 billion worth of emergency loans backed by the U.S. Small Business Administration, assistance that was created in the recently signed federal stimulus package. Demand will be very high, judging from Rotatori's initial experience with borrower outreach as well as the state Department of Economic and Com- munity Development's new bridge loan program being almost instantly oversubscribed by cashflow-hungry employers trying to make payroll. Rotatori, who said Ion's March loan delinquency rate spiked about three- fold, and other industry experts expect to see the small business stimulus funding wiped out within one week's time. The industry is hoping Congress increases the size of the lend- ing pot in the near future. In general, banks and credit unions have money to lend and they're not pulling back. "I think right now, we're status quo, we're not constricting lending at all," said Duane Crisco, CEO of Wind- sor Locks-based 360 Federal Credit Union, which has 18,043 members and $234.2 million in assets. "It's about understanding what's be- ing offered to small businesses and individuals, and we can help supple- ment that with payment deferrals or lower-rate loans." Mortgage relief Signatories to the recent state mortgage-relief pact announced by the Lamont administration have pledged to provide up to three months of forbearance to mortgagees who attest they've been financially impacted by the COVID-19 crisis. The process is envisioned to be simple, without many hoops to jump through, Banking Commissioner Borrowed Time CT lenders show customer solidarity during pandemic, but worries linger Helping Hand Here are some facts about the state's new mortgage-relief program. It offers: Grace period of up to 90 days for mortgage payments for COVID- related reasons, with opportunity to extend forbearance agreements in the face of continued hardship. Relief from mortgage-related late fees and charges for at least 90 days. For those who secure relief agree- ments, lenders won't share informa- tion about late or missed payments with credit agencies. Financial institutions will not start any foreclosure sales or evictions for 60 days. Late last year, David Rotatori was happily celebrating Ion Bank's expansion into Farmington. COVID-19 has made his and other bankers' jobs much more challenging and less cheery. PHOTO | HBJ FILE "Financial institutions have been working proactively with borrowers right from the get-go." Thomas S. Mongellow , President and CEO, Connecticut Bankers Association

• Cover