With Wachovia and Washington Mutual being bought out by more stable institutions, some local community banks have found more opportunities to expand their lending businesses despite what economists are calling the worst financial crisis in decades.

Still, community bankers are being cautious about approving loans amid a declining real estate market and rising unemployment.

"I think [community banks] have the opportunity to become more competitive, because I don't think Wachovia and WaMu and their ilk have been that busy underwriting new loans recently," said Ted Kovaleff, analyst at Granta Capital Group in New York City.

Also, New Jersey's economy has held up better than many other states where real estate values climbed faster and fell harder, and most of New Jersey's community banks have avoided the subprime and exotic loan markets which were the downfall of financial services giants Bear Stearns, Lehman Brothers, Washington Mutual, Wachovia and others.

While large, over-leveraged institutions lost access to operating capital, community banks continue to raise cash by offering competitive rates on certificates of deposit and by borrowing at comparatively low rates from the Federal Home Loan Bank.

Still, deposit gathering for banks both large and small has been constrained lately by consumer fears about rising bank failures and limits of Federal Deposit Insurances Corp. coverage. "Jumbo CDs [those in amounts exceeding $100,000] are not very much in play," Kovaleff said.

"Community banks are not having a liquidity problem," said Robert Monteith, chief executive officer of NVE Bank in Englewood. "I heard on TV that you can't get an automobile loan. Well, you can come into our bank and get an automobile loan."

To be sure, Monteith said, the bank is taking "a harder look" lately at applications for small business loans backed by accounts receivable and inventory, due to concerns about the economy.

Kevin Lynch, chairman and CEO of Washington Township-based Oritani Bank, said Oritani is seeing more and more larger loan applications, as credit from investment banks and other financial institutions has dried up. "We have done some transactions as large as $21 million," Lynch said. Customers seeking more than $10 million would in the past go to investment banks because their interest rates were lower.

Tom Guinan, the bank's chief lending officer, said that commercial loans, which in the past made up about 10 percent of the bank's lending business, now account for about 25 percent.

"It was rare that we would see loans over $10 million in the past, and we might only get one or two opportunities a year," he said. "Now we are getting one or two opportunities a month."

Atlantic Stewardship Bank of Midland Park on Tuesday had $48 million of approved business loans waiting to close, an amount which has been virtually unchanged for the past year, said Paul Van Ostenbridge, chief executive officer. "We are still going full- steam ahead. There is no reason to turn the tap off."

The company lends primarily to small manufacturers, warehouse operators, and mom-and-pop businesses, he said. Atlantic Stewardship has tightened lending criteria for commercial mortgages, on the recommendation of regulators who are concerned about potential losses industry wide. "They have seen a correction in housing, and they are anticipating a correction in commercial real estate," Van Ostenbridge said.

Englewood Cliffs-based North Jersey Community Bank also tightened standards recently. The bank will lend only up to 70 percent of the value of a project, instead of 75 percent, said Frank Sorrentino III, chairman and chief executive officer.

"If we are in a declining market, we feel we need to be more conservative," he said. The bank's top customers are owners of commercial real estate and apartment buildings, and the average loan size is $1.5 million to $2 million.

The bank's lending business is up about 30 percent to 40 percent over last year, to about $290 million, he said. Commercial loans make up about 70 percent of that business, and a big part of the increase in lending is due to the disappearance of competition from some Wall Street investment companies, insurance companies and hedge funds, he said.

"We are seeing a tremendous amount of demand for all types of commercial lending," said Sorrentino, adding that demand has about tripled.

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Banks bouncing back?

Many banks' shares rallied Tuesday, including some North Jersey- based lenders

Bank Closing price Up

Hudson City Bancorp $18.45 11.8%

Clifton Savings Bancorp $11.99 9.3%

Valley National Bancorp $20.96 4.3 %

Stewardship Financial Corp. $13.10 2.8%

Lakeland Bancorp $11.69 1.0%

Source: Yahoo! Inc.

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Staff Writer Hugh R. Morley contributed to this article. E-mail: newman@northjersey.com

(c) 2008 Record, The; Bergen County, N.J.. Provided by ProQuest LLC. All rights Reserved.