Hartford Business Journal

14 Hartford Business Journal • March 7, 2016 www.HartfordBusiness.com Crawford IV. " … If all you're doing is mortgage lending, it's a very crowded busi- ness. Everybody in the world is doing it.'' Fresh regulatory data shows mort- gage-loan volumes among Connecticut's federally insured lenders have fallen during the past eight years. Among 44 lend- ers with Connecticut headquarters, their overall ratio of one- to-four-family mort- gages to assets fell to 27.3 percent as of Dec. 31, 2015, down from a peak of 37.7 percent on Dec. 31, 2007, according to the Federal Deposit Insurance Corp. W a l l i n g f o r d ba n k- compl ia nce consultant Leonard F. "Len" Suzio Jr. says that, in addition to market forces, mort- gage lenders, too, are reacting to mount- ing regulatory pres- sure requiring them to adhere to tighter loan underwriting and other regulato- ry guidelines aimed at avoiding a repeat of the subprime loan debacle nearly a decade ago. "The mortgage market is extremely com- petitive and profitability has been squeezed by new regulations mandating more paperwork and expanded mortgage originator responsi- bilities — and potential liabilities,'' said Suzio, president of GeoDataVision. "We have a num- ber of clients who are expanding their mar- kets to offset the competitive squeeze within their own natural mortgage markets.'' Big U.S. lenders with mortgage desks — among them Bank of America, Chase, Wells Fargo and Freedom Mortgage — already have begun retrenching from the sector, eschewing pursuit of new mortgage borrowers, accord- ing to published reports. Even mortgagors with no intention of diversifying away from lending on real estate are eager to broaden their base of patrons for their services. Take Simsbury Bank & Trust Co. Two years ago, the $445 million-asset, Farming- ton Valley mortgage and small-business lend- er began pursuing opportunities to widen its lending to the homeowner and condomini- um-owner associations across the state. Its success with those efforts, said SBT President/CEO Martin J. Geitz, is reflected in the momentum SBT has built the past year with its lending to resident-owners of some aging condo properties that require new drive- ways, roofs and other common-area amenities. "What we find is the homeowner-associa- tion boards and the people who manage them want to do business with a lender who under- stands how condo associations work,'' Geitz said. "We've built an expertise in that area.'' Travis Lan, vice president and Northeast bank analyst at KBW Research in Florham Park, N.J., said other small lenders in recent years have turned to equipment financing and other forms of asset-based lending, which typically generate higher profit yields but also require much more attention and scale to be profitable. Lan, however, has raised concerns about United's marine-loans purchase and the creation of its LH-Finance division, which is partnering with European lender CGI Finance to underwrite boat loans. "The move diverts attention and resources away from the community bank,'' Lan said. Crawford, who arrived at United's predeces- sor, former Rockville Financial, in 2011 from Wells Fargo Bank, downplays those concerns. He notes that the $170 million marine- loan portfolio accounts for just 3 percent of United's $6 billion in assets, adding that it's conceivable the portfolio could eventually reach 5 percent or 6 percent of assets. Even so, Crawford said, United has done its homework and is confident about its prospects in marine lending. Parent United Financial Bancorp Inc., Crawford said, "gets ideas all the time'' about new lending and financial-products markets and business opportunities, typi- cally presented to it by its investment bank- er and from other sources, usually at the rate of about 20 per month. "We always look,'' he said, "at businesses related to banking where we think we can make a decent return relative to the risk.'' Crawford said United's latest return on assets of 0.87 percent compares favorably with its peers. "Our focus is really on taking care of our customers,'' he said, "and creating the stron- gest return we can for our investors.'' In 2015, United issued some $700 million in residential/commercial mortgages, a record sum compared to the $150 million in mort- gages issued in 2011, the CEO said. But United must take care not to become too overconcen- trated with loans from one sector, he said. "We would expect to have more mod- erate growth than we've had in the past,'' Crawford said. "The bigger you get, the harder it is to grow.'' n 'Tweaks' sought to CT's EXP loans/grants program By Gregory Seay gseay@HartfordBusiness.com T he state's e c o n o m i c - development agency, with back- ing from some Con- necticut bankers, is pushing several "tweaks'' to lever- age and expand the reach of its popu- lar Small Business Express (EXP) loan program. State Depart- ment of Economic and Community Development (DECD) Commissioner Cath- erine D. Smith advocated last week before the legislature's Commerce Committee for changes to the EXP initiative launched five years ago to assist fledgling and small busi- nesses with access to capital at a time when many lenders in and outside the state were forced to the sidelines by the Great Recession. DECD's proposal, under House Bill 5045, includes eliminating the eligibility requirement that a company younger than 12 months old cannot apply for EXP aid, and creating a new loan fund in conjunc- tion private Connecticut lenders. EXP was born in the Jobs Bill of 2011, to provide businesses with revolving and forgivable loans and grants to promote job growth. In her testimony to the Commerce Committee, Smith said nearly 1,500 busi- nesses have received more than $230 million in assistance in exchange for commitments to create or retain more than 22,000 jobs. As capital markets improve and banks become more active again in lending, how- ever, Smith said it would be wise for the state to partner with private lenders to enhance Connecticut's lending environment. Some Connecticut bankers agree. Mar- tin J. Geitz, president and CEO of Simsbury Bank & Trust, a $445 million-asset commu- nity lender, said he and his peers believe that their participation in EXP lending will bet- ter leverage the state's funding allocation. Geitz, who is immediate past president of the Connecticut Community Bank- ers Association, pointed to his and other Connecticut banks' ongoing participation as sanctioned lenders in various federal Small Business Administration loan pro- grams, leveraging federal guarantees and the banks' capital to finance a broad pool of undersized and startup enterprises. "It may be a way for the state,'' he said, "to get even more lending to the busi- nesses that are the target of its economic- development program.'' Of course, it also would provide partic- ipating banks, Geitz said, the opportunity to cross-sell mortgage-lending, wealth- management and other loan and financial services to EXP companies, their manag- ers and owners. Beyond the opportunity for state lend- ers to get involved, Smith said DECD is responding to situations in which fledg- ling firms were reaching out to the state's quasi-public technology investment arm, Connecticut Innovations Inc., about bank- rolling them because they didn't meet EXP's minimum-age requirement. Although they possessed a solid busi- ness plan, she said, many don't meet the true definition of being technology companies. "We want to support those companies as well,'' said Smith. Smith said DECD also is aware of occa- sions in which small state businesses, to comply with the current age minimum for EXP applicants, wait until the day of their first anniversary to apply for EXP aid. This is the second year in a row that DECD has asked lawmakers for permis- sion to amend EXP guidelines, to allow participation by banks and younger firms. The measure failed last year, Smith said, because lawmakers had so much on their plates and "it got lost in the shuffle.'' While confident about the chances for passage this time, the commissioner said she's learned never to get hopes too high. "I just worry,'' Smith said, "that everything in a short session gets piled on at the end.'' n Overcrowding has mortgagors eyeing options from page 1 Connecticut Bank's Mortgage Loan Decline Federal data shows the declining percentage of one-to-four- family mortgage loans Connecticut banks have on their books compared to their overall assets. Year Ended Assets % of assets in 1-4 Dec. 31 family mortgages 2015 $99.6B 27.32% 2014 $92.9B 27.63% 2013 $83.4B 28.22% 2012 $81.5B 28.22% 2011 $79.2B 28.71% 2010 $82.9B 29.92% 2009 $77.5B 31.43% 2008 $74.5B 34.12% 2007 $64.9B 37.65% S O U R C E : F E D E R A L D E P O S I T I N S U R A N C E C O R P. Catherine D. Smith, commissioner, Connecticut Department of Economic and Community Development. Martin J. Geitz (right), president/ CEO of Simsbury Bank & Trust Co., alongside bank finance chief John Sudol. P H O T O | C O N T R I B U T E D P H O T O | H B J F I L E

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