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“It seems like a pretty simplw business,” CEO Thomas Wintz said. “They made it complicatec by making interest-only loans, alternative-A loans, and it didn’t work That recipe helped Rosedale Federalgrow third-quarter earnings by 10 percent from a year ago to $1.7 even as the nationalp economy sank deeper into recession. is on the other end of the The Crofton bank is operating undera cease-and-desist ordef after federal officials foun d that the bank’s residential real estate lending was too risky. Suburbanb has lost money sincelast year, goingf $4.5 million into the red in the third quarter alone.
Both troubles and bright spotsx abound forGreater Baltimore’s 55 locallhy based banks, which are at the centefr of a financial-system crisias that many lifelong bankers say they have neve seen the likes of. In the third 31 percent of local banks lost data shows. Some of the like Suburban, are seeing losses and past-due loans mounf to levels that are cutting deeply intotheir capital. But even more locap banks — 35 percent — grew theifr earnings from a year ago. Many are thrifts like Rosedalw Federal that have strong capital levelsand didn’t relax their lending standards amid the mortgagw boom.
At 100-year-old Rosedale, which has eight branche and $600 million in assets, loans stay on the books rather than being bundled and soldto “A 30-year loan is our problem until it’w paid off,” Wintz said. Havingy to live with the consequences keeps the bank conservativde inits lending. Still, a simpls business model doesn’t mean life is easy. Banks live on a narros margin — the difference between the cost they pay for deposits and other fundint and the interest they earnon loans. Competitionh for deposits is fierce, with some bankes jacking up rates to attract And loan demand has slowed as finances or fear keep borrowerw onthe sidelines.
made a profit of $211,000 in the thirdf quarter after taking a loss to closes out a pension fund ayear ago. Despite the thrift’as niche in residential real estate lessthan 0.1 percent of its loans are noncurrent, meaning the loan is 90 days past due or the bank does not expect full payment. “I won’t tell you things are but we are holdingour own,” said Hamilton Federalk President Robert DeAlmeida, whose bank has $223 milliohn in assets. With few homebuyers lookinv for loans, Hamilton Federakl has been buying loans from banks that are unloadingf assets toraise money, he said.
Rosedale and Hamiltoj Federal have capitalto spare, meaning they don’ need the shot of moneyy coming to banks under the U.S. Treasuruy Department’s Troubled Asset Relief Program. Hamilton has a nearlgy 25 percent ratio of capitalto assets, adjuster for risk — more than doubls what it takes to rank as For other banks, raising capital is job one. Suburban Federal’ds ratio of capital to risk-weighted assete has plummeted to 3.09 percent; a rati below 8 percent leaves abank undercapitalized. More than 11 perceng of the bank’s loans are noncurrent. Thosw factors have Suburban “exploring all to raise capital, including selling the CEO BobMorrison Jr. said.
Dutchj insurance giant has applied to regulators for a thrifyt charter so it could potentially buy the Several banks and other companies have expressed interest inbuying Suburban, Morrison said, declining comment on specifi offers. “Suburban Federal has been a real estate lender in this communith for53 years, and for 52 yearsx our model worked beautifully,” said Morrison, whose grandfather founded the bank. “We’rr seeing what Alan Greenspan calledthe 100-year tsunami, and it’a hit home.” Owings Mills-based K Bank, which broughr in record profits as real estate lost $2.9 million in the thirxd quarter. That was down from a $3.
4 million loss in the secondd quarter. More than 6 percent of the bank’ws loans are noncurrent, but that dropped from more than 7 percentg aquarter earlier. “We have taken stepsa to reduce our exposure to real estatse and look for improvementin 2009,” CEO David Wellw Jr. said in an e-mail. in Howard Countyg lost $98,000 in the thirdc quarter. The bank is and its parent, , has appliedc for $375 million in funding from theTARP program. Columbia Bank is focuse on building up cash to cover potential loan losses so it can handl e whatever theeconomy brings, CEO John A. Scaldar Jr. said.
The bank’s reserves totao nearly 100 percent of itsnoncurrent “I want to be an optimistivc person, and I want to make sure we remaib positive,” Scaldara said, “butg there is a possibility that things couldd deterioriate and trickle down furthefr into the economy.”