James Tiernan has been the senior vice president of the business lending department at Bank Rhode Island for more than six years He has more than 20 years experience in the local commercial lending arena, working for Fleet Bank and Citizens Bank before going to BankRI. There is no doubt that it is an interesting time – in the current economic climate – to be the leader of a bank’s commercial lending division.
PBN: Much has been made nationally about the so-called credit crunch. Is there a crunch here in Rhode Island for businesses seeking financing?
TIERNAN: Although there is apprehension over the economy, to this point there has not been much of a change in the ability of well-managed companies to secure credit on reasonable terms in the Rhode Island marketplace. Banks are certainly taking a more cautious approach to lending in general, but credit is still available, and most local banks, including BankRI, have the ability and desire to provide that support.
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PBN: Have BankRI’s lending standards tightened as the economy has deteriorated in recent months and the possibility of defaults has increased?
TIERNAN: We continue to look at opportunities the same way we always have, but do pay greater attention to the risks presented by the current economic conditions. With all the fuel-related issues, the potential for growth in inflation and the impact of the housing crisis, it is prudent to spend a little more time getting to know your customers and prospects. Since all lending decisions are made right here in Rhode Island, we understand the subtleties of the marketplace and can be more attuned to financing opportunities that others may overlook. BankRI has not made any widespread changes in its approach to lending. We continue to take a prudent, common sense, hands-on approach to providing financing support to our customers.
PBN: What are some of the big concerns among the commercial customers you’re talking with?
TIERNAN: Small-business owners continue to voice concerns about the typical subjects (high labor costs, insurance expenses, health care expenses and utility costs), but now, more than usual, they express apprehension about the economy and where it is heading. As the presidential election approaches, there are additional concerns about increasing taxes, the ballooning deficit and the impact that these may have on the business environment during 2009 and beyond. Many of the business owners I speak to frequently mention the high operating costs in the Northeast and its impact on their competitiveness with companies operating in lower-cost areas.
PBN: The companies that come to BankRI for financing, what are they doing with the capital in this environment?
TIERNAN: The most common request is for working capital lines of credit, followed by commercial-mortgage financing for the purchase or construction of owner-occupied, commercial real estate used in the expansion of an existing business. Although we continue to see acquisition financing, these opportunities seem to be less common these days. Equipment financing comes in a distant third, which we accommodate both through the bank and our equipment leasing company, Macrolease.
PBN: Is there any type of business that you’re seeing more of in these times, that is either performing strongly or wants use the economic sluggishness as an opportunity to strengthen their position in the marketplace?
TIERNAN: I think one of the goals of most businesses is to strengthen their position in the marketplace. There is not one particular type of business that seems to be prospering in the current economic environment, but that is not to say that there are not plenty of strong and healthy businesses out there. The BankRI commercial loan portfolio covers the full range of service providers and manufacturers. We have companies that supply component parts to the oil industry, some that manufacture items used by the military, and others that create and distribute publications to the educators worldwide. All of them are prospering. We have observed that businesses that are selling (exporting) outside of the United States have enjoyed strong demand for their product, driven by the relative weakness of the U.S. dollar. This has begun to show some moderation as the dollar has strengthened against foreign currencies. Alternatively, businesses that are reliant upon the local Rhode Island economy have not enjoyed quite as much of a growth opportunity in this difficult environment.
Bancorp Rhode Island Inc. (Nasdaq: BARI), based in Providence, is the parent of Bank Rhode Island, a state-chartered, FDIC-insured institution with 16 branches in Providence, Kent and Washington counties. Additional information about BankRI and its parent company is available at bankri.com.
