Bad loans still cripple Philly-area banks
Losses at Wilmington Trust, Beneficial and Abington; signs of growth returning this Spring at National Penn, First Niagara
Profit reports from a string of Philadelphia-area banks shows they're still suffering from - in some cases, the banks are disappearing because of - bad construction loans and falling property values from the mid-2000s financial crisis and the resulting business slowdown that's thrown millions out of work.
1) Susquehanna Bancshares will have to mark down $31 million in troubled loans at Abington Bancorp as Susquehanna buys the smaller institution. More than half the mark-downs are for construction loans that aren't being repaid on time (or at all), Sandler O'Neill bank analyst Frank Schiraldi told clients in a report today.
Schiraldi is "neutral" toward the Abington deal; though the acquired bank is weighted with problem loans and is much smaller than Susquehanna, the takeover does give Susquehanna nearly 5% of the market in wealthy Montgomery County, up from a little over 1% now. Abington branches will take the Susquehanna name; none will likely be closed.
But some headquarters and back-office workers lose their current posts: Susquehanna plans to cut the equivalent of $8 million (almost a third of 150-worker Abington's budget). On the other hand, Abington CEO Bob White gets to keep his job, plus a seat on Susquehanna's board.
2) Troubled Wilmington Trust Corp. posted a fat $200 million-plus loss this morning, on the eve of its planned discount sale to M&T Corp. of Buffalo. WTC's loan portfolio has shrunk from $9 billion a year ago to less than $8 billion; bank boss Don Foley blames "weak demand" from recession-strapped Delaware business as the bank works its way through hundreds of millions oin bad construction loans.
3) Beneficial Mutual Bancorp of Philadelphia also blamed commerical real estate loans for not making money last quarter. Recovery "will take some time" as local property values keep falling, boss Gerry Cuddy said in a statement.
4) Maybe a bright spot: National Penn Bancshares has hired at least a dozen lenders and credit officers in recent months; has started calling small businesses seeking borrowers; and will find it easier to start making mroe business loans again, once it pays back federal TARP investments, as expected this Spring, writes Bob Ramsey, bank analyst at FBR Capital Markets.
5) Also, First Niagara Corp., new owner of failed former Harleysville National Bank, is boosting business lending in Eastern PA and other markets - though a lot of that is due to First Niagara picking up clients from stingy rivals, not increased demand for new business customers and loans, Boenning & Scattergood analyst Thomas Frick tells me.