Jump in LI lending to businesses bucks U.S. trend

Long Island banks are continuing to buck a national trend by increasing lending to businesses, despite regulatory pressure to adopt stricter lending standards.

Statistics released this week by the Federal Deposit Insurance Corp. show that in the second quarter of the year, Island-based banks continued to outlend their peers in the rest of the state and the nation. Overall net loans by banks were up locally by more than 14 percent from a year ago, while nationally they declined by 3.6 percent and statewide by 10 percent.

Bankers say that's a credit to Long Island's economy, which has not suffered as much as the rest of the country, and to its banks, which largely resisted making risky loans before the recession and are now in a better position to lend as a result.

"It certainly says that Long Island is home to a good number of healthy banks," said Kevin O'Connor, president and chief executive of Bridgehampton National Bank.

But he noted that the Island also benefits from its proximity to Wall Street, which has recovered from the crash. Long Island's relative economic health means there are more businesses here that are inclined to borrow, he said.

"There are a lot of well-run businesses that have weathered the storm," O'Connor said, adding that the demand for borrowing may increase but many large banks are still not ready to lend, and that creates an opportunity for local banks to step in.

Any bank, whether it's here or in another part of the country, wants to lend money, said Douglas Manditch, chairman and chief executive of Islandia-based Empire National Bank. That's how banks make money.

But he said regulators are making it more difficult to lend by requiring banks to have more capital and keep larger reserves in case loans go bad.

In his bank's case, he said, regulators are particularly watchful of commercial real estate lending, which is the main way businesses borrow.

Regulators are still struggling to understand their own rules and exercise "an unreasonable amount of power" over banks' practices, said Joseph Ficalora, president, chief executive and chairman of New York Community Bank, the Westbury company that runs nine banks - including Roslyn Savings Bank - in the metropolitan area, Ohio, Arizona and Florida.

Most Long Island banks are able to overcome strict regulation because they're in good shape and smartly operated, he said.

O'Connor said regulators' attention has trimmed lending, even as political leaders call for more of it.

"In some cases we may lend less than we otherwise would have," he said. "In other cases we may have asked for additional collateral."

Banks therefore find themselves "balancing the conflict between bureaucrats and politicians, and we're at the apex," O'Connor said.