Reports from Philadelphia-area banks are mixed

Local bankers had little positive to say about the economy this week, even as some reported progress in dealing with bad loans and a gradual recovery of profits.

"Things are getting better for us," Scott Fainor, president and chief executive officer of National Penn Bancshares Inc., said Thursday after the Boyertown, Pa., bank reported a $10.3 million profit in the third quarter. "We now have three straight quarters of credit quality getting better."

But on the broader economy in Pennsylvania, Fainor was less than enthusiastic: "We see some positive signs of stabilization. What we don't see are any particular growth areas."

Kent C. Lufkin, president and chief executive of TF Financial Corp., was even more downbeat.

"We do not see any particularly encouraging signs that positive factors are going to emerge in the foreseeable future," Lufkin said in a news release.

TF, which owns Third Federal Bank in Newtown Township, Bucks County, on Thursday reported a small decline in profit from last year's third quarter, and a significant jump in problem loans.

To reduce costs in light of the poor outlook, TF Financial suspended this year's incentive-pay programs for employees and will not pay $235,000 that had been earned through June 30, the bank said.

Six of eight local banks that reported third-quarter earnings this week said they had earned more than a year earlier - but most are still facing a growing mound of bad loans. The other two banks, TF and Vist Financial Corp., of Wyomissing, Pa., reported profit declines.

The two biggest area banks to report this week, Susquehanna Bancshares Inc. and National Penn, said loan volume had been down from the end of last year as charge-offs and loan payments outpaced new loans.

Five of six smaller banks, including Univest Corp. of Pennsylvania, of Souderton; Fox Chase Bancorp Inc., of Hatboro; and Parke Bancorp Inc., of Washington Township, reported aggregate loan growth this year of $133 million, or 3.4 percent. Loans at Third Federal were down.

Area banks are increasingly owning property used as collateral on loans. Six that provided that information for Sept. 30 and last Dec. 31 reported a 46 percent increase, to $26.65 million, in property taken over after defaults by borrowers.

Among those properties is the Woodbury Country Club, which is in the hands of Parke Bank. Owning property is the last resort for a bank.

"No bank really wants to take over real estate," said Sandy Spratt, chief executive of Ardmore Banking Advisors. "That's not productive. It takes a lot of time, and they usually lose money on it somehow."