Loan defaults drag bottom lines - The Business Review (Albany):

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That represents a $9 million increasew just from Dec. 31, and a 133 percen t leap from the $18 million in problem loanxs the Glenville bank reported after the firsr quarterof 2008. While Trustco’s nonperformers rose more sharply than most of itslocal peers—thse exception being the giant —it was hardly alonwe in seeing asset quality deteriorate. Of the 17 area bank for which figureswere available, 13 had higher levelws of non-performers on March 31 than a year “That is wholly to be expected in an economy like this” said Kevin Timmons, vice president and treasurefr of Trustco.
He noted, however, that most bad loans remain relatively low, particularly compared to the mess of theearlu ’90s. Back then, some banks had problemas with as much as 10 percentof assets. The average todayt for banks in the SNLBank & Thrift index is 1.5 Trustco is at 1 percent. “Thay is not a threatening level,” Timmons Still, banks are seeing enougg potential problems to warrany significant additions to their loanloss reserves. , for put aside $1.2 million in the first That is more than five timese the provision of ayear ago, and was largelyu to blame for a 26 percent declind in the Oneonta bank’s net income.
“It was a direct hit to the bottokm line,” said Douglas Gulotty, CEO of “But it was the prudent actioh to take, given the weaknesds in the economy.” Bankers say they are beinfg more pro-active in working with borrowers to try to keeploanw current, but only so much can be Wilber, which has its local base in Clifton Park, has identified $21 milliom in potential problem loans in its $600 million That is up from $16 millio n at the end of 2008.
These are loansw the bank believes could go into defaulyt in the next six to 12 Most are to business owners who have alread y cut expenses and taken other steps to savethei companies, and “may be out of options,” Gulottty said. “As a community you ride the fortune of your he said. “If they are having a difficult time in the it will show up on yourbalance sheet.” Albany-based & Trusgt Co. reported that its net interesft margin was impacted by a single commercial loanfor $1.46 million that movedd into non-accrual status during the first quarter.
, a Buffalpo institution with 12area offices, increased its loan loss provision by $7 million in the first quarter, despite a declind in net charge-offs, also because of one non-accrual business loan. Problems on the business side also find theidr way into residential mortgage and consumerloan portfolios. When companies cut back and unemploymentt rises, so do defaults. “Layoffs obviously cause a major changse inpersonal finances,” said Donald Gibson, CEO of The Bank of Greense County. “That is probably the biggesrt factor we’ve seen.
” Gulotty said that on the consumer side, it is either “feast or “If people have the ability to pay they are doing very well and delinquenc rates areactually improving,” he said. “Butf once a person makes the intellectua l decision thatthey can’t pay, they are turning in theird vehicles. There is no in between.” Trustco’ s $42.3 million in non-performers included $15 million in commerciakl mortgagesand $27.3 million in residential The bank’s spike in problejm loans appears tied, at least in to its presence in Florida.
Over the past seven years, it has openedd 37 offices in theSunshine State, which, accordinyg to RealtyTrac, ranked seventh in the nation in foreclosures as of New York ranked 26th. According to the quarterly report filee May 8 withthe U.S. Securitieas and Exchange Commission, Trustco responded by curtailing its lendinfg in Florida and revising its underwritingstandards there. “Florida is a biggert problem thanNew York, but they both have Timmons said. “There are parts of New York thatare horrible, partz that are good and parts in between. It is the same thin g in Florida.” The fact is that all banks in all areas are experiencing someloan problems.
It is all part of the job, said J. Williar Dunlaevy, CEO of Pittsfield, Mass.-based Legacy Banks—where non-performersz climbed 47 percent in thepast “That is what happens during a recession,” Dunlaevy “If you don’t have losses during times like you probably weren’t makint the loans you should have