Partners Boost Commercial Lending in New York State
Community bankers know that relationships are essential to success. And sometimes relationships between bankers are among the most important.
Little Valley, N.Y.
Assets: $200 million
Retail locations: Eight
Full-time employees: 65
That has been especially the case at Cattaraugus County Bank headquartered in Little Valley, N.Y., for which participation lending relationships represent 14 of the bank’s 20 largest loans in the bank’s growing commercial loan portfolio. Despite the tough economy, the bank has enjoyed a 25 percent increase in lending over the past two years. Commercial lending composes the majority of the bank’s lending today.
“A meaningful part of our growth is our relationship with a handful of fellow independent community banks that are near us, but generally whose markets don’t overlap ours,” says Michael Wimer, president of Cattaraugus County Bank, a $200 million-asset community bank known locally as CCB. “Our participation volume has certainly increased materially.”
CCB is the largest lone community bank serving the three-county area, a distinction—with its local, flexible decision-making—that has recently given the bank an advantage in building its loan portfolio of commercial clients. “Our folks have done an exceptionally good job of leveraging the uniqueness and the advantages of still truly being a community bank, and all that that means,” Wimer offers.
“We live, breathe and eat community banking,” adds Max Pickard, CCB’s senior vice president and chief lending officer. “We sell that to our clients, and they appreciate it.”
Tourism and hospitality
Little Valley in western New York, about 70 miles east of Erie, Pa., has not been an economically booming community, Pickard points out. The area’s economy was once dependent on timber and manufacturing, but now counts on three area ski resorts and other hospitality and service industries. The unemployment rate in the area is among the highest in the state of New York.
“Sixteen years ago, when I came, we were about 70 percent residential mortgage and 30 percent commercial,” Pickard says. “And it’s pretty much flipped now, and we’re the other way around.”
CCB’s commercial and industrial loans total about $75 million, and $53 million of which involves commercial real estate lending. The bank, which has eight locations spread across three counties, also carries about $35 million in residential mortgages, $12 million in home equity lines, $4 million in agricultural loans and $3 million in consumer loans.
But recently CCB has been booking participation loans that have prominently helped boost and diversify its commercial portfolio and keep the portfolio healthy. The bank has established participation relationships with a half-dozen other community banks in the Buffalo, Rochester and Syracuse areas. Currently it’s involved in 14 participation loans, five of which involve the bank’s own customers.
“We live, breathe and eat community banking. We sell that to our clients, and they appreciate it.”
—Max Pickard, Cattaraugus county bank
“When we’ve got a customer that’s growing, or whose borrowing needs are growing beyond what we can do ourselves, then we’ll tap one of our friendly neighbor banks, if you will, and share what we can’t keep with them,” Wimer says.
“When we participate, we know the banks we’re participating with,” Pickard adds. “It’s somebody whom we could reach out to and touch the bank, and it’s within a drive for us to get to see the client, if we need to.”
Still conservative lending
CCB’s other nine participation loans, which were originated and are maintained by other community banks, are from areas outside CCB’s normal geographic marketplace. The margins on these participation loans are less than that of organically generated loans, but so is the ongoing workload of overseeing the loans.
“We’re not expending the energy and resources to develop those relationships or those opportunities,” Pickard explains. “[The partner bank] is running the bill out to the customer, they’re collecting the payment. Then they share the payment with us. Vice versa, when we’re participating out, we’re doing the legwork and we’re getting the servicing fee.”
Wimer sees CCB’s recent success in participation lending as a way to apply the conservative, strong credit quality community bank model on a broader scale. “It’s been a good and healthy thing for us to be doing,” he says. “Ultimately, we’ve helped each other extend the community banking approach, if you will, to customers of a size that might not otherwise have access to it.”
For 2015 and the near future, Wimer sees participation lending contributing to the bank’s continual growth following its recent steady pattern. “I don’t see us changing course or looking to do things drastically different, or any of that,” he says. “It’s just continuing to find ways, including staffing capacity, to do more of what has already been working well.”