'We have cash to lend,' many small banks proclaim

The troubles of Wall Street have led many on Main Street to believe that all banks will stop lending, a move that would squeeze businesses and individuals into a recession or complete economic collapse.

But the bankers of Main Street want consumers to know they’re still offering loans. Executives of three local community banks and credit unions say they avoided the disastrous path of subprime loans and are connecting qualified borrowers to needed cash.

“We have the money, and we are lending,” Triangle Credit Union President Maurice Simard said.

Indeed, although many larger national banks have restricted lending because of a tightening economy and losses accrued from defaulted loans, smaller banks have avoided the perils of the credit crunch, Simard and other banking executives and experts said.

Large banks “didn’t care” and gave money “to everybody and anybody,” Simard said. But small banks didn’t advance money to borrowers flirting with nonpayment, and they continue to use low-risk underwriting criteria on residential and commercial loans, Simard and the others said.

Because of this close-to-the-ground approach and a strong deposit flow, they are in a strong position to lend, they said.

“They’re the least affected by what’s happening,” University of New Hampshire professor of finance Peter Kaen said. “They typically haven’t been involved in these exotic securities and haven’t been put on hold by Wall Street. They’re in fairly good shape.”

That should put consumers and businesses in New Hampshire at ease. Even with a slow national economy, people and companies still seek money for construction, renovations, mortgages, cars and other costly expenses, and if they can’t access those funds, the local economy would really feel the pinch.

Jay Dinkel, director of community banking and lending for Hampshire First Bank, said when trouble hit Wall Street last month, customers in the process of obtaining loans had a pressing question.

“They ask, ‘Does this change what we’re doing?’ And I say, ‘No, of course not,'” Dinkel said.

Hampshire First Bank is not yet two years old, so it wasn’t around when subprime loans were handed out like lollipops at a teller’s window. The bank nonetheless wouldn’t have embraced lenient borrowing standards, just as it doesn’t today, Dinkel said.

“I don’t want to ignore the aspect that it is a slower time than it was, but still, there are a number of businesses and industries doing well,” Dinkel said. “Our message is we certainly have money to lend. We’ll talk to anyone interested in borrowing.”

The Nashua Bank celebrated its first anniversary last week, so it, too, wasn’t competing with lenders offering subprime loans to almost anyone who could scratch a signature on a bank note. But as with Hampshire First Bank and Triangle Credit Union, The Nashua Bank said it considers a number of factors when scrutinizing applicants for commercial loans, which are the bank’s primary line of financing.

Cash flow and collateral are closely considered, the history of a business is reviewed, and the owner’s integrity and skills are judged when granting a loan, said G. Frank Teas, president of The Nashua Bank.

“We’re taking deposits and making loans to locally owned businesses,” Teas said. “Wall Street got involved in swaps and derivatives that people didn’t understand. We’re taking deposits and analyzing risks. We’re real good at analyzing.”

He added: “The larger guys won’t be in a position to do that. The demand for lending will increase, and increase our loan portfolio.”

Community banks and credit unions have strong sea legs just as consumers seek safe passage through an economic storm, experts said.

“It’s probably not fair to describe it as a niche market, but they’re able to deal personally with these borrowers,” Kaen said of small banks. “They’re not putting all this stuff through computerized programming and a scoring system, and they’re able to work with individuals with good credit or bad credit.”

Many New Hampshire banks, in fact, are anecdotally reporting record numbers of commercial and residential loans, state Banking Commissioner Peter Hildreth said. “They’re not suffering,” he said. “They’re having especially good years in contrast to the big national banks.”

Simard said Triangle Credit Union is about to have one of its best years. That success comes largely because it approaches business like a small community bank, he said.

The standards of lending are tight, and deposits continue to increase because people want to keep their money local, Simard said. One customer’s deposit is another customer’s car loan, he said.

Also, close relationships with customers preclude bad business, Simard said. Triangle recently had two foreclosures and a few delinquent mortgages, both rarities at the credit union, he said.

But Triangle worked with all those customers, and the foreclosures were finalized with solutions that “really didn’t take their homes away,” he said.

That customer-minded approach and sensible business practices give the smaller state-chartered banks and credit unions an advantage over their larger competitors, Kaen said.

“What you’ll see increasingly is a few number of large banks,” Kaen said. Those banks hold about 30 percent of national deposits, but are probably “too big,” to survive these times, he said.