Long Island's Own Banks Have Cut Construction Lending by a Third

The ten year Treasury note closed at 4.83 percent on September 9, the highest reading of 2026 and 86 basis points above the 3.97 percent it touched on February 27. Freddie Mac put the average thirty year fixed mortgage at 6.71 percent for the week ended September 3, the highest weekly reading since the end of July 2025. Neither of those is a Long Island story. What the banks headquartered here did with their loan books while that was happening is, and they publish it themselves, four times a year, in call reports filed with the FDIC.

Read six quarters of those filings together and one line stands out. The banks based in Nassau and Suffolk have cut construction lending by a third.

Five banks, one balance sheet

Six FDIC insured institutions are headquartered in Nassau or Suffolk. One of them is not really a Long Island bank in any operating sense: Flagstar Bank, National Association, has its charter address in Hicksville, 87.7 billion dollars in assets and 345 branches across the country, so its lending reflects national decisions rather than local ones. Set it aside and five are left.

Dime Commercial Bank in Hauppauge, with 15 billion dollars in assets and 64 offices, is by a wide margin the largest of them. Esquire Bank in Jericho holds 2.5 billion, Hanover Community Bank in Garden City Park 2.3 billion, First Central Savings Bank in Glen Cove just over 1 billion, and American Community Bank, also in Glen Cove, 307 million. Together, as of the June 30 reports, they carry 21.2 billion dollars in assets and 15.75 billion in loans and leases.

That combined loan book grew 2.5 percent over the six quarters since the end of 2024. It is close enough to flat that the headline number tells a member nothing. The lines underneath it tell a member quite a lot.

Three lines, three directions

Construction and land development loans across the five fell from 191.8 million dollars at the end of 2024 to 126.4 million on June 30, a decline of 34 percent. That is the money that funds a ground up building or a gut renovation before there is a certificate of occupancy or a tenant paying rent.

Commercial and industrial lending went the other way, from 1.98 billion to 2.75 billion, up 38.5 percent. That is the category that holds a line of credit, an equipment note, a term loan against a receivables base. It is the borrowing most Chamber members actually do.

Loans secured by nonfarm nonresidential property, the ordinary commercial mortgage on a warehouse, an office condo or a strip center, drifted down 3.5 percent to 5.42 billion.

Dime accounts for much of the movement in absolute dollars and shows the pattern cleanly on its own. Its commercial and industrial book went from 879 million to 1.23 billion over the same span while its construction book fell from 136 million to 84 million and its commercial mortgage book gave up roughly 250 million. Esquire, which has carried no construction loans at all through the entire period, grew its commercial and industrial book from 903 million to 1.34 billion. At the small end, American Community Bank now reports a construction portfolio of 611 thousand dollars, which is a rounding error on a 307 million dollar bank and is, functionally, a decision to stop.

Why a flat book with moving parts is the actual news

A bank whose total lending is flat and whose fastest growing line is up nearly forty percent is not lending more. It is reallocating. Every dollar that left construction and commercial real estate had to land somewhere, and it landed in business lending.

The mechanism is not mysterious. Construction lending is the most capital intensive, longest duration, hardest to exit exposure a community bank holds, and it is the one regulators scrutinize hardest when commercial property values are soft. When the long end of the curve sits at the top of its yearly range, a project underwritten at a lower cost of debt no longer pencils, and the loan the bank would have made against it does not get requested or does not get approved. Business lending, by contrast, is shorter, repriced faster, and secured against something that generates cash this quarter.

What replaces the missing construction dollar is worth watching. In June, the Suffolk County Industrial Development Agency approved an inducement resolution for a 10.3 million dollar renovation at 80 Arkay Drive in Hauppauge, where the applicant plans to rebuild 133,755 square feet of a functionally obsolete 200,000 square foot building for technology, research and manufacturing tenants. The agency held its public hearing on July 20. The project abstract lists no tenant and zero present employees, and projects 100 jobs at an average salary of 103,867 dollars once the space is leased. The fifteen year payment in lieu of taxes carries an estimated 1.8 million dollars in property tax relief plus 630 thousand in sales tax exemption and 78 thousand in mortgage recording tax, against roughly 4.4 million in taxes still paid over the term. That is a speculative industrial redevelopment being made viable by a public subsidy stack rather than by cheap construction debt, and it is happening in the middle of the Chamber's own corridor.

What it means for members

If your next twelve months include a build out, an expansion into raw space, or a purchase of a building that needs work before it can be occupied, start the financing conversation now and start it with more than one lender, because the local banks have collectively pulled a third of their construction capacity off the table and the remaining appetite is concentrated in fewer places. If instead you need working capital, equipment, or a line against receivables, you are borrowing into the one category these banks are actively growing, and you have more leverage on pricing and terms than you did eighteen months ago. And if your project is a redevelopment rather than a straight purchase, the industrial development agency route is no longer an exotic option for large companies. It is increasingly the thing that makes the numbers work at all, and applications take months, so the time to ask is before the deal is signed rather than after.