Executive Suite: Banker Douglas Manditch

Douglas C. Manditch, of St. James, heads one of Long Island's smaller banks, but he is one of the region's most outspoken bankers.

A 48-year veteran of the industry whose career began at the now-defunct Security National Bank, Manditch co-founded Empire National Bank in 2008 to focus on serving privately owned small to midsize businesses, professional practices and not-for-profit organizations, as well as the owners, managers and employees of those companies.

Empire has three branches -- at its corporate headquarters in Islandia and in Shirley and Port Jefferson Station. Manditch says it's about to lease space for a fourth -- in Mineola -- and will probably add another every 18 months to two years.

Manditch has championed the cause of small banks like his, railing against federal economic policy and the banking regulations in the Dodd-Frank Wall Street Reform and Consumer Protection Act that was passed after the financial meltdown of 2008. He says the rules penalize small banks for the sins of large banks and investment houses. He claims the regulations make it more difficult for them to survive independently and fulfill their role as local institutions where small businesses can seal a financing deal with a handshake.

Empire emerged in April from an oversight agreement with the federal Office of the Comptroller of the Currency, its primary regulator. OCC said in 2010 it found unsafe and unsound banking practices relating to earnings and liquidity at the bank.

Empire agreed to maintain adequate capital, improve profitability, avoid relying too much on commercial real estate lending and to take other steps to ensure the bank is stable.

I think they're being cautious. When you look back at what occurred, not only with home mortgages but credit cards, there were abuses on both sides -- the borrowers and the lenders -- and I'm not so sure it was the lenders as much as it was the securitizers of the mortgages that sold them in the market. So it became a free-for-all. Everybody's house became a credit card. Debt increased to an unbelievable dimension.

They are; it's knee-jerk response.

I think all of that. They don't want to be part of the bad public relations any more. We don't do home mortgages, but I have to say I have heard that said. I think the big banks are mostly terrified about the Consumer Financial Protection Bureau, because it seems to have the ultimate power to do whatever it wants to do. That's always scary to the bigger institutions when they have that much power over them. [But] I do believe that consumers were abused. I think that credit card companies -- if you were late on a payment to one company, another would raise your rates to 29 percent -- I do think that's abusive.

Don't forget we're less than 5 years old. I've tightened my credit standards now on commercial real estate. Because most commercial real estate [mortgages] re-prices in about five years, and with interest rates so low, if rates do go up, I don't want customers so overleveraged that we have an issue five years from now.

Yes. The worst thing that can happen to a small bank is bad loans.

With the Fed printing money, I think there are many issues that could be problematic. First, I don't see how printing more money creates jobs, which is what we need more than anything else. Printing more money is going to create the inflation we don't have, it's going to create higher energy costs, it's going to create higher food prices. I think we are aimed in the wrong direction in how to solve this issue.

I'd like to see the federal government just butt out for a while. I think that their steps haven't created what they thought they were going to create. And even [Federal Reserve Chairman Ben] Bernanke said [regarding QE3] that this isn't going to create more jobs.

I'd like to see local towns find a way to lead through the quagmire of what's politically correct and what's economically good for all the citizens. I think that takes strong leadership. Too often, local government panders to the civic associations. Multifamily housing, mixed-use properties -- retail on the bottom, apartments on the top -- apartment houses . . . Will it bring in more traffic? I don't know, but I know it will keep more young people on Long Island if there's affordable housing and jobs. I think they have to make those decisions based on the good of everyone, not just a single local group.

Community banks are extremely important to job creation. Community banks are the fuel that allows small companies to grow. And between community banks and credit unions, we probably do 70 percent of the financing of small businesses, and as you probably know, 60 percent of the jobs are created by small business. [But] right now the businesses that have survived the last four years and are doing OK are not looking to expand. There's not enough demand from qualified customers. We have probably about $100 million approved in commercial lines of credit, of which only 40 percent are used.

Probably about 60 percent.

Some would have. [But] many business owners don't want to pay any taxes, so therefore they don't show any profits. If you don't show profits, there's no way you can borrow because you don't show the ability to repay the loan.

A lot of small businesses think they can get loans just because they've been in business for a period of time, but you have to remember that banks don't really want to lend more than 50 percent generally of what a company is worth. We don't want to become the owner of the business. So if smaller companies don't have capital and don't show earnings, it's very very hard to make loans because they can't justify paying it back. There's a misconception out there that banks are here just to give them money. We need to get paid back.

I think the biggest concern among all business people is ''Is there a market for my product? Can I sell what I have? How can I expand my business with so much uncertainty?'' I think when people sit back and see where they are, there's not a significant feeling that anything is going in the right direction right now. Unemployment is growing on Long Island as opposed to shrinking. Home values -- I don't know if they've even hit bottom yet.

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