Jun. 8--The continuing residential housing crisis and the more recent commercial real estate downturn have taken their toll on banks on Long Island and nationwide. Rising numbers of homeowners and commercial property owners are facing foreclosure, leaving banking institutions with more bad loans.

Long Island's eight public banks are weathering the downturn to varying degrees, their Securities and Exchange Commission filings show. Though most reported a profit, almost all increased their 2009 first-quarter loan-loss reserves to cover problem loans.

Those reserves are like a rainy-day fund the banks tap into when loans go bad because builders, commercial real estate owners or homeowners can't pay their mortgages. The set-asides eat into profit.

Overall, though, Long Island's banks still get some high marks. Mark Fitzgibbon, director of research at the securities firm Sandler O'Neill & Partners in Manhattan, called them "a bit more disciplined" than many other banks, and said they "will by and large survive and get through this difficult environment." But he warned, "It's probably going to get a little worse before it gets better."

Lake Success-based Astoria Financial Corp., the Island's second-largest bank by assets, set aside the largest amount of reserves: $50 million, up from $4 million in the first quarter of 2008, largely because of residential real estate losses around the country.

In April, Sandler O'Neill cut the bank's stock rating and said the company might need to set aside even more reserves. But Astoria's president, Monte Redman, said the bank doesn't expect to use up the full set-aside because of its conservative loan standards.

"We have better protection than the average bank," he said.

Smithtown Bancorp set aside the second-highest amount to cover problem loans: $12.4 million from $9 million the year before. "That's largely the result of . . . loan growth," said chief executive Brad Rock.

Smithtown a 'go-to' bank In fact, Hauppauge-based Smithtown, one of the Island's fastest-growing banks, saw its real estate portfolio -- largely commercial real estate -- jump more than 60 percent to $1.8 billion in the first quarter from the year before. Sandler O'Neill calls it "one of the go-to banks on Long Island for businesses and commercial-multifamily property owners."

Jericho-based State Bancorp Inc., one of the Island's smallest banks, set aside the third highest to cover problem loans: $10 million in the first quarter, compared with $1.6 million a year ago, largely because of soured residential construction loans.