Middlesex North Register of Deeds Richard P. Howe Jr.
Two Lowell-based banks stand out for the dead weight on their books.
Both banks had high levels of loans 90 or more days overdue last year.
Despite the geographical connection, industry experts say it’s simply a coincidence that the $108 million-asset Lowell Co-Operative Bank showed 10.75 percent of its loans as non-current at the end of 2007 and the $673 million Lowell Five Cent Savings Bank reported nearly 6.6 percent of its total loan dollar volume in the same category.
Data are based on information from the Federal Deposit Insurance Corp. as compiled by The Navis Group in Gloucester. The FDIC defines non-current loans as those three months or more in arrears.
Suzanne Moot, owner of the Milton-based bank consulting firm M & M Assoc., said she thinks it is mere happenstance that the two banks with the state’s most severe non-performing loan problems are both based in Lowell.
“I wouldn’t say it’s anything about Lowell – but I would say, and I think most bankers would say, that construction loans by their nature are among the riskiest loans banks make,” she said.
Lowell Five’s $23 million in non-accruing loans are accounted for by two construction loans the bank foreclosed, according to Chairman, President and Chief Executive Officer Robert Caruso. One was the $18.5 million Grandview condominium project, which the developer got to market late, selling just 34 of 120 units as the real estate market softened. A second $4.5 million loan for an office complex that was never completed also defaulted.
Last year, the bank had no non-accruing loans. Lowell Five last week signed a purchase and sale agreement for the condominium property with Lowell-based developer Princeton Properties, which will market some of the units for sale and rent out most while waiting for a better sales market.
About $38 million of Lowell Co-Operative’s $66 million in loans last year were for one- to four-family residences, and about $16 million in construction and land development, according to the FDIC, which also showed that $7.4 million of the bank’s loans were non-accruing, including $3.6 million in construction and $2.5 million in residential loans.
The bank foreclosed on just two properties in 2007, according to Middlesex North Register of Deeds Richard P. Howe Jr., but has foreclosed on four more so far this year. All are outside Lowell, he said.
Last year, the bank had 6.52 percent non-accruing loans.
Lowell Co-Operative President and Chief Executive Officer Richard Coughlin did not return calls from Banker & Tradesman.
‘A Realistic Price’
Most analysts and bank presidents contacted by B&T said the shaky economy and continuing record foreclosure numbers mean it’s likely that the number of non-current loans at banks will continue to go up before they come down.
“We’re in the third inning of a nine-inning game,” said John P. Clancy Jr., chief executive officer at Lowell-based Enterprise Bank, a 19-year-old, $1 billion commercial bank where 0.4 percent of the loans were 90 or more days overdue at the end of last year.
Banks statewide had an average of around 0.6 percent of loans overdue.
Lowell Co-Operative and Lowell Five were ranked No. 51 and No. 72, respectively, on American Banker’s list of the 150 U.S. banks with the “highest non-performer ratios,” published March 18.
Jerry Frechette, vice president for lending and compliance at the $162 million Washington Savings Bank in Lowell, predicted that non-accruing loans “will still be a major issue” through 2008.
“There are lots of foreclosure mitigation efforts out there,” he said. “But I don’t know, in the final analysis, how many people they can help.”
Washington Savings, which does the bulk of its lending in the single- to four-family residential mortgage realm, is “very proud” of the 0.1 percent of loans it had in non-current status at the close of 2007, according to Frechette, who attributed the low number to the bank’s underwriting standards.
At the $236 million Butler Bank in Lowell, where 58 percent of lending is in construction with most of rest in residential mortgage loans, President and Chief Executive Officer John Pearson Jr. is more optimistic.
“This bank has been getting payoffs, this month, which means that properties have been starting to sell,” said Pearson. At the end of 2007, Butler Bank counted $15 million in loans past due between 30 days and 89 days, about half in construction loans, and $4.4 million in non-accrued assets 90 or more days past due, three-quarters of which were construction loans.
While Moot said those numbers make the bank “look like it has a lot of exposure,” Pearson said Butler Bank wants to help customers in temporary financial trouble.
“If people are trying and they are in arrears, we feel our job is to help people work through a period that’s a little rough,” he said. “In our case, it was builders that got a little ahead of themselves, by not reducing prices fast enough.”
Howe said he’s noticed that in the last three to four months local banks have started showing up more in legal foreclosure auction notices.
That’s different from the recent past, he said, explaining that community banks previously had not often been named as foreclosing entities in registry records.
