WOODBRIDGE, Conn. -- The fate of a once-troubled bank in Connecticut - where nearly 40 institutions have failed since 1989 - hinges on small-business lending.

To be sure, the disposition of bad assets has been the top priority at what is now Connecticut Bank of Commerce. The past three years were smeared with red ink.

But this year the bank picked a new name, turned its first quarterly profit since 1989, and set its sights on a niche which might not seem plausible in a state that is bleeding jobs.

However, the retreat of defense and aircraft powers in Connecticut is a windfall for small businesses.

And the Bank of Commerce, a $139 million asset institution, hopes to pick up some of the stronger credits among them.

ROE Soars

This year, the bank - which changed its name from Amity Bank in February - sold a significant volume of previously charged-off assets.

As a result, return on equity, which had fallen to minus-39.6% at yearend 1992, soared to 90.46% by June.

The following month, the bank hired Stephen M. Hotchkiss as chief executive.

The veteran banker was approached because he had a reputation for -- as he puts it - running a tight ship.

But he also has experience in business lending.

In fact, the bank he left in July, Patriot National, is a de novo that was established to target small business lending opportunities in Fairfield County.

Mr. Hotchkiss says that, aside from an expertise in installment paper for military vehicles, Commerce had been a plain-vanilla operation.

Work to Do

Its plan to target small business makes sense.

Demand is high, many Connecticut bankers say, and while "a lot of heavy industries have downsized, that doesn't mean the work has gone away," says Joanne van Vechten, district director of the Small Business Administration.

"It's just being subbed out."Top Ten Community Bank LendersTo Small Businesses in Connecticut Number Total in of loans millionsLafeyette American 1,267 $73Bank and Trust,BridgeportBank of New Haven 848 $49The Savings Bank 733 $44of ManchesterBristol Savings Bank 570 $37Great Country Bank, 383 $32BridgeportNorwich Savings 461 $31SocietyNorth American Bank 441 $27and Trust, StratfordAmerican Bank of 226 $26Connecticut, WaterburyWestport Bank and 457 $25TrustMechanics Savings 305 $24Bank, Hartford(*) C&I loans up to $1 million outstanding through the first half of 1993; all banks holdless than $1 billion in assetsSource: Ferguson & Co.

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