Well, well, well. Five months ago this paper came under heavy fire for daring to name 10 banks that looked to be on the road to ruin, due to the percentage of their past-due loans.
Every trade association conference and industry cocktail party we went to, we heard the same thing: “That headline on the 10 worst banks … what were you thinking?” “Ten On The Road To Ruin? That was over the top.”
But no one seemed to have a problem with the story, which quoted Q1 2008 FDIC call report data that at the time showed while all Massachusetts-based banks have capital levels of 8 percent or more, “past-due loans made up more than 40 percent of equity capital for 10.”
Some of the banks listed in an accompanying chart contacted us saying they would be off the list by the next quarter. And in good journalistic fashion, we reported an update a few weeks later when Q2 data was made available: sure enough, six banks had dropped off the list.
One of those banks was Medway-based Strata Bank. We reported that 48 percent of its equity capital was holed up in past-due loans – those 30 days or more overdue. Strata later ran into trouble with its investments in Fannie Mae, Freddie Mac and Lehman Brothers in the third quarter (writing down more than $8 million in losses) before agreeing to be bought out by Middlesex Savings Bank in December.
One of the banks that made both Top 10 lists last fall, Lowell Co-operative Bank, had 72.6 percent of its equity capital tied up in troubled loans in Q1. By Q2 that number jumped to 93 percent. No surprise, then, to see that bank dump its CEO while agreeing to be sold last week for $8 million to a group of private investors.
Moral Of The Story
Our readers may think all we love to do here is rub our hands together while drooling as we think up ways to write and illustrate how bad banks, real estate companies and commercial developers have it during these days of doom and gloom. They may think, erroneously, that we are more like a trade publication – only presenting recent promotions and how-to succeed articles – and, therefore, should not be reporting bad news.
But we think we present a balanced take on what’s going on out there and how others are weathering the storm. We’re not complaining that readers took umbrage with a “sensational” headline. If we had been wrong, we would have corrected the matter. But there are troubled banks out there: there will be more failures and buyouts and capital infusions from the feds.
The road to ruin currently has no off ramp, no termination on the horizon. We are not going to hold your hand while heading down this highway, but we take these times seriously and will continue to report the numbers, good and bad, and try to forecast who will make it to brighter destinations – and who will fall by the wayside.â–
