Hartford Business Journal

24 HARTFORDBUSINESS.COM | MAY 18, 2026 Chris Nelson (left), owner of Nelson Construction, and Andreas Kapetanopoulos, regional president for Connecticut and Massachusetts at NBT Bank, stand in front of the Luminary Simsbury Meadows apartment project under construction in Simsbury. HBJ Photo | Steve Laschever Balancing Act Banks remain bullish on apartments even as they keep closer eye on exposure risks tempering apartment lending after a surge in construction activity across Connecticut and signs of saturation in some regions. Kelly said Ion Bank has kept a close eye on thousands of units continuing to come online in markets such as Hartford, New Haven and Shelton. Some landlords have begun offering free-rent concessions to attract tenants, which she said is an early indicator that supply is starting to catch up with demand in certain markets. "Our portfolio is performing very well. We have no issues, but we are beginning to scale back in our lending to this sector just to avoid further concentration," Kelly said. Ion Bank had $348.8 million in multifamily residential real estate loans at the end of 2025, up from $251.3 million a year earlier and $49.6 million in 2019, FDIC data shows. Kelly said Ion Bank will continue to finance strong multifamily projects while also increasing its focus on other sectors, including single-family subdivisions, light industrial and retail. 'Eggs in that basket' John Carusone, president of the consulting firm Bank Analysis Center, said banks have safeguards in place to prevent them from becoming too heavily exposed to any one lending category. Multifamily loans have become an increasingly important source of income for Connecticut banks and generally carry moderate risk compared with some other lending categories, he said. "I believe that the risk profile of multifamily loans is of controllable and moderate concern compared to other risk profiles, such as business loans, for instance, which are much more sensitive to the overall business environment," Carusone said. A 10% to 15% concentration in multifamily loans would not generally be considered excessive risk, though higher concentrations warrant closer scrutiny, he said. "Thirty percent begins to push a category of concentration and needs to be closely followed," Carusone said. "Doesn't mean those loans are compromised. It just means that that's an awfully big part, and you are really putting a lot of eggs in that basket." Connecticut apartment landlords are increasingly offering free-rent periods to attract tenants as compe- tition in the rental market grows. According to data maintained by commercial real estate tracker CoStar, the average value of those incentives has more than tripled since early 2022 and is now at its highest level since 2019. At the same time, multifamily housing construction in Connecticut has rebounded sharply following a pandemic-era slowdown. According to U.S. Census Bureau data, permits for buildings with five or more units fell from 3,153 units in 2019 to 1,483 By Michael Puffer mpuffer@hartfordbusiness.com E ven as bankers remain confi- dent in the long-term outlook for multifamily housing, some lenders are becoming increasingly cautious about their growing exposure to apartment lending after years of rapid loan growth in the sector. Shaun Dwyer, a senior vice president of commercial lending with regional lender PeoplesBank, said multifamily has become a dominant share of many banks' recent deal flow. "It's understandable that you have a lot of these portfolios start getting a little bit more heavily concentrated in the multifamily front, mainly because that has been one of the only assets, or the predominant asset, that has been in development and within high demand across the board," he said. Dwyer estimated multifamily loans now account for around 40% of his bank's commercial real estate port- folio, up from roughly 30% before the COVID-19 pandemic. He said the Massachusetts-based bank, which has $4.5 billion in assets and seven branches in Connecticut, has not changed its underwriting standards but has become more selective in pursuing new apartment deals over the past two years, leaning more heavily on experienced developers with strong track records. Dwyer said the bank's more measured approach reflects broader economic uncertainty and concerns about having too much exposure to multifamily lending, rather than any loss of confidence in the apartment market. Tariffs, geopolitical insta- bility and questions about ongoing federal support for affordable housing are among the factors driving that caution, he said. Apartment lending surges PeoplesBank's multifamily lending grew far faster than its overall loan portfolio between 2019 and 2025, according to Federal Deposit Insur- ance Corp. data. The bank's total loans and leases increased 55.1% during that span, from $2.26 billion to $3.51 billion. Meanwhile, its multifamily real estate loan commitments jumped nearly 150%, from $143 million to $356.2 million. As a result, multifamily loans grew from 6.3% of PeoplesBank's total loans and leases at the close of 2019 to 10.1% by the end of 2025. A similar trend can be seen across the 28 banks headquartered in Connecticut, where multifamily loan holdings surged 335.7% over the past six years, rising from $2.56 billion to $11.15 billion, according to a Hart- ford Business Journal analysis of FDIC data. During that same period, multifamily real estate loans more than doubled as a share of banks' overall loan portfo- lios, reaching 12.5% at the end of 2025. Jayne Kelly, chief commercial banking officer at Naugatuck- based Ion Bank, which has $2.7 billion in assets, said her insti- tution is intentionally Shaun Dwyer Jayne Kelly FOCUS | COMMERCIAL RE AL ESTATE LENDING

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