Lending on the rise for Naugatuck Savings Bank

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NAUGATUCK — Naugatuck Savings Bank saw an uptick in its lending for the first half of this year, compared to the two previous six-month periods.

The bank originated $130 million in loans during the first half of 2013, according to a six-month earnings report released late Tuesday. The lending consisted of $27 million in business loans and $103 million in consumer loans, almost half of which were residential mortgages.

The total was up from $118.7 million in the second half of 2012, and from $111.4 million for the first half of last year, said Charles Boulier III, the bank’s president and chief executive officer.

Boulier said historically low interest rates on mortgages and personalized service contributed to the increase in lending.

“We really try to provide great service through our loan originators, who will come to your house if you want,” he said, adding the bank services its own loans. “We keep the servicing because we’re a community bank, they’re our customers and we want to service them.”

In the release, Boulier said the loan originations helped the bank earn $2 million in net income for the first half of this year. The bank, which has 18 branches throughout the Naugatuck Valley, posted net income of $2.1 million for the same period last year.

“I’m very pleased with our performance,” Boulier said. “It’s stable, it’s solid given the interest-rate environment, and margins are declining.”

He said the net income for the second half of 2012 was $893,000, due to higher marketing costs for the opening of its new Wallingford branch and higher employee benefit costs.

The fees gained from selling long-term, fixed-rate residential mortgage loans — which the bank still services — was $659,000 for the first half of this year, compared to $924,000 for the first half of 2012. Fees for the second half of last year totaled $1.3 million.

The bank’s net interest margin — the difference between interest income and interest paid to patrons — declined to 3.45 percent in the first half of this year from 3.62 percent a year earlier.

The bank had $768.9 million in total net loans for the first six months of 2012, up from $750.6 million in the second half of 2012 and $751 million for the first half of 2012.

Boulier said the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in 2010, has yet to affect the bank’s lending performance. It may have an impact, however, when the Consumer Financial Protection Bureau’s “qualified mortgage rules” are implemented, he said.

“You may see banks reducing the number of loans because it’s going to dictate what the back-end ratio is” for loan approval, he said.

Back-end ratio is the percentage of a person’s monthly income that goes toward debt.

Boulier said the regulations may also increase origination costs because loan figures reported per the Community Reinvestment and Home Mortgage Disclosure acts must be totally accurate.

“I hired half an FTE (full-time equivalent employee) just to make sure the loans don’t have errors,” he said.

There are certain aspects of Dodd-Frank that will add additional layers of complexity and additional costs to smaller institutions offering residential loans, said John Carusone, president of the Bank Analysis Center in Hartford.

“There are certainly some nuances that may be problematic to institutions, but we won’t know what those nuances are until they are in complete form,” he said.

Total assets for the privately held mutual savings bank, operating under Nutmeg Holding Co., were $972 million for this year’s first half, up from $953.7 million for the same period last year. The bank’s total assets for the second half of 2012 totaled $942 million.

Boulier declined to comment on how much the bank’s name change to ion Bank, expected next month, will cost. “It’s immaterial for a bank of our size,” he said.