LI banks still lending but feel pressures to curb it

Long Island-based banks continued to lend money to businesses in the most recent quarter while banks elsewhere restricted lending, but some warn that this disparity may disappear in the next year or two.

A tougher regulatory atmosphere and an economy that remains sluggish could lead more Long Island banks to ease off the lending throttle, said Michael Vittorio, chief executive of Glen Head-based First National Bank of Long Island.

In the third quarter his bank's lending was up 24 percent, or $166 million, over the year-earlier quarter, but he said that kind of growth may not be sustainable as long as unemployment and foreclosure rates remain high locally.

"One has to wonder about the viability of the economy here on Long Island," Vittorio said. "We could be in this quandary for quite some time. Some of the local banks are under increasing regulatory pressure. It's more than possible that Long Island banks could cut back on their lending."

For the most part, though, that hasn't happened yet.

Overall lending by local banks was up 12.6 percent from the previous year's third quarter, while nationally it was down 0.1 percent. Bankers say that's because as sluggish as the local economy is, it's still better than the economy in other parts of the country. And they say community banks know their borrowers better and base lending decisions on more than just credit scores.

"For us, it's still close contact with clients and understanding what their business model is," said Kevin Santacroce, chief lending officer for Bridgehampton National Bank. "Bigger banks can't do that as easily."

Community National Bank of Great Neck, with just seven branches and $471.4 million in assets, has become the second-largest Small Business Administration lender on Long Island after Chase Bank, with $132 billion in assets. Stuart Lubow, Community National's president, said his bank is still benefiting from the credit problems larger banks had and their inferior customer service. But he said the economy plays a role, too.

"You can't lend to someone if they don't come to you and ask for it," he said.

Raymond Hart, owner of Hart Petroleum in Deer Park, went to a dozen larger banks without success last year before turning to Community National for a $400,000 line of credit and the refinancing of $1.2 million in existing debt. "We had just about given up hope," Hart said. "They moved ahead on it."

Thomas O'Brien, chief executive of Jericho-based State Bank of Long Island, echoed Lubow, noting that the economy here is "far from good. It's just not as bad as the rest of the country."

He and others said that if the economy falters and if regulators continue to increase their pressure on banks to maintain higher capital levels, lending will decrease locally, particularly by weaker banks.

Santacroce was more optimistic, saying he's seen signs of activity from small and mid-size local businesses. "The economy has stabilized," he said. "We're in recovery, albeit slow . . . We still think Long Island is a great place to do business."