Hartford Business Journal

24 HARTFORDBUSINESS.COM | FEBRUARY 24, 2025 FOCUS | BANKING & FINANCE said. "We have one of the most educated workforces in the country, a prime location between New York and Boston at a more affordable cost, and a strong defense contracting industry with many tentacles. Overall, it provides a stable C&I market, presenting opportunities for banking services." Strategic shift: CRE loans Lenders in 2024 were more active with commercial real estate deals, which provide capital for the acquisi- tion, development and construction of income-producing properties. Sixteen Connecticut-based banks saw their commercial real estate portfolios increase, while 12 banks saw a decrease. Torrington Savings Bank, with $958.6 million in assets, and Chelsea Groton Bank, with $1.7 billion in assets, had the fastest-growing commercial real estate portfo- lios, increasing 48.8% and 23%, respectively, to $145.9 million and $180.5 million. Torrington Savings in recent years made a strategic decision to expand its commercial real estate lending to diversify its largely residential loan portfolio, according to Paul F. Larsen, the bank's senior vice president and chief lending officer. As part of the strategy, the bank hired seasoned commercial bankers, he said. "Opportunity to gain traction in this sector," Larsen said, "was prompted by an increase in demand for apart- ment units and supporting infrastruc- ture throughout the state, changing demographics, and a saturation of (commercial real estate) exposure at many of the banks which historically financed these deals, allowing for refinance opportunities." Larsen added that while the percent increase in the bank's commercial real estate portfolio has grown significantly in recent years, the exposure relative to Torrington Savings' overall assets and capital- ization remains modest and lower than other banks in the market. Richard Balestracci, senior vice president and commercial lending department manager at Chelsea Groton, said his bank has strategi- cally grown its commercial lending team to six loan officers who in the past year responded to several market needs, particularly for the housing, medical, light industrial and independent living sectors. Balestracci said he projects another year of strong commercial lending growth for the bank in 2025, partic- ularly with the ongoing expansion of Groton-based Electric Boat and other major employers in the region. new business. "Our lending activity has been well-balanced with funding towards traditional as well as affordable and senior housing," he said. The multifamily lending envi- ronment remains stable with high demand and limited supply, Lewis added. The challenge in 2025 will be rising interest rates, local zoning issues that block new projects, and increasing construction costs, he said. "Despite the challenges, we continue to work with existing and new real estate developers that are looking to build new apartments in our market," Lewis said. "We expect our multifamily portfolio to grow this year, but at a slower pace." Glenn Campbell, Essex Savings Bank's chief lending officer, said 2025 may not be as robust a year as 2024, but the housing market continues to be "under-built," creating additional financing opportunities. His bank has been particularly active financing affordable housing projects, fitting with Essex Savings' overall mission, Campbell said. "We anticipate that banks will continue to support this space in the near term. That said, a downturn in the economy or unanticipated movement in interest rates could give potential investors pause," Campbell said. The federal funds rate ranged between 5.25% and 5.5% for most of 2024 — the highest levels since January 2001 — until the Federal Reserve initiated three separate rate cuts between September and December. The current target rate ranges between 4.25% to 4.5%. Larsen, of Torrington Savings, warned that banks and other lenders must be cautious over the next few years to see how the market absorbs all the new apartments that are being built. Federal data shows the pace of new apartment development in Connecticut reached new highs in the last two years. The number of building permits issued for multifamily housing projects with five or more units in 2024 (4,100) and 2023 (3,937) were the highest tallies on record in Connecticut since at least 1995, U.S. Census Bureau data shows. Permits were issued in 2024 for 151 different multifamily buildings with five or more units. "It's important to move prudently, recognizing that the last few years have seen thousands of new apart- ment units introduced to the market and many additional projects remain to be completed," Larsen said. "At some point soon, Connecticut will reach a saturation point for this type of property." Glenn Campbell Capital Pipeline Continued from page 23 CT-BASED BANKS WITH FASTEST-GROWING COMMERCIAL REAL ESTATE LOAN PORTFOLIOS 2024 LOAN BALANCE 2023 RANK BANK HQ (in 000s) (in 000s) % CHANGE 1 TORRINGTON SAVINGS BANK TORRINGTON $145,985 $98,134 48.8% 2 CHELSEA GROTON BANK GROTON $180,513 $146,775 23% 3 JEWETT CITY SAVINGS BANK JEWETT CITY $106,468 $86,603 22.9% 4 DR BANK DARIEN $101,549 $87,714 15.8% 5 THE GUILFORD SAVINGS BANK GUILFORD $239,489 $208,995 14.6% 6 NORTHWEST COMMUNITY BANK WINSTED $183,968 $163,028 12.8% 7 THE FIRST BANK OF GREENWICH COS COB $250,537 $225,922 10.9% 8 WINDSOR FEDERAL BANK WINDSOR $190,461 $172,848 10.2% 9 WEBSTER BANK STAMFORD $12,635,475 $11,553,766 9.4% 10 THOMASTON SAVINGS BANK THOMASTON $474,946 $434,984 9.2% Source: HBJ Analysis; Federal Deposit Insurance Corp. data CT-BASED BANKS WITH FASTEST-GROWING MULTIFAMILY RESIDENTIAL REAL ESTATE LOAN PORTFOLIOS 2024 LOAN BALANCE 2023 RANK BANK HQ (in 000s) (in 000s) % CHANGE 1 ESSEX SAVINGS BANK ESSEX $11,326 $6,410 76.7% 2 THOMASTON SAVINGS BANK THOMASTON $47,748 $27,825 71.6% 3 CHELSEA GROTON BANK GROTON $23,829 $14,284 66.8% 4 ION BANK NAUGATUCK $233,765 $150,630 55.2% 5 JEWETT CITY SAVINGS BANK JEWETT CITY $29,037 $20,381 42.5% 6 THE TORRINGTON SAVINGS BANK TORRINGTON $29,549 $21,999 34.3% 7 FIRST COUNTY BANK STAMFORD $128,394 $99,463 29.1% 8 DIME BANK NORWICH $108,386 $85,169 27.3% 9 FAIRFIELD COUNTY BANK RIDGEFIELD $68,383 $56,311 21.4% 10 BANKWELL BANK NEW CANAAN $284,013 $236,664 20% Source: HBJ Analysis; Federal Deposit Insurance Corp. data NEW PRIVATELY-OWNED MULTIFAMILY HOUSING UNITS AUTHORIZED IN CT 5K 4K 3K 2K 1K 2016 122 2017 108 2018 105 2019 121 2020 120 2021 116 2022 113 2023 145 2024 151 BUILDING PERMITS ISSUED IN PROPERTIES WITH 5 OR UNITS NUMBER OF BUILDINGS WITH 5 UNITS OR MORE Source: U.S. Census Bureau Paul Larsen "Our commercial lending pipeline remains strong, and while some prop- erty types are still in transition, our focus is on staying agile and closely monitoring the economic drivers of each property type." Apartment boom The multifamily real estate market was a particularly active sector last year as eager investors and devel- opers — spurred by Connecticut's housing shortage and government incentives — proposed or began construction on new projects across the state. Correspondingly, Connecticut's 29-based banks grew their multifamily loan portfolios by 4.5% through the first three quarters of 2024 to $10.5 billion. They were led by Essex Savings Bank, with $489.2 million in assets, and Thomaston Savings Bank, which grew their multifamily portfolios by 76.7% and 71.6%, respectively, to $11.3 million and $47.7 million. Stephen Lewis, president and CEO of Thomaston Savings, said his bank's growth was driven by Connecticut's strong housing demand and existing commercial clients expanding their portfolios, as well as

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