ABA Banking Journal - January 2008 - (Page 23) Bradford. “Now he’s back accounting for nearly half of Noncurrent rate on real estate construction building again.” the bank’s loan portfolio and development loans percent Bradford says that the and residential mortgage (1991-2007) noncurrent smaller builders, having lending representing most somewhat more flexibility 14 of the rest. John H. “Jock” than a large player like Pearson, Jr., president and Horton, are still doing relaCEO, represents the third tively well in his area. They generation of his family are tending to play more 12 managing this 107-year-old conservatively, cutting the specialized lender. spec homes they commit to. But this has been a rough “Times are generally period for some area 10 good, and [people are] buybuilders, and for Butler. ing homes,” says Bradford. “I don’t think we’ve Much of what’s moving is in found the floor yet,” says the midsize range. “We Pearson, reflecting on the 8 think the really large homes falloff in home sales that has and the really small ones driven down housing starts will not move,” he adds . in the region. “Builders who The strong Fort Worth would build 25 houses are 6 economy also accounts for building 12. The ones who continuing viability among built 12 are building six, and the construction and develso forth. It’s harder for us to 4 opment and commercial real keep up our flow of busiestate deals that the bank is ness, but we are seeing the seeing. Noncurrents in market’s inventory come these areas are quite low for down. It’s tough as nails out First National and business there, right now, to get new 2 continues to come along. business in.” “It’s amazing how well Thus, builders who are it’s held up,” says Bradford, going to make it through 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 in spite of high foreclosures this relatively dry spell are Source: FDIC Quarterly Banking Profile in the market, brought going to have to have some about through the subprime muscle behind them. lending crunch. Indeed, there’s enough volume out there that “They’ve got to have the cash, and the willingness, to be able Bradford can afford to be selective. to hold onto the houses for a while,” until buyers come along, Case in point: an $18 million participation deal for a residen- says Pearson. “Builders who are pricing their properties at martial development shopped to Bradford recently. The bank con- ket are selling”—eventually—“but those who still want to get sidered going to its legal lending limit—about $1 million—but their full price aren’t.” took a pass. Bradford says the development’s lot size and home Numbers tell the story size just seemed too large for the current market’s appetites. Pearson’s comments on sales reflect the regional, and also, Tougher in the Northeast national trends. In early December the National Association of Circumstances are somewhat more challenging in the construc- Realtors noted that the Pending Home Sales Index for the tion and development sector for Butler Bank, a $220.2 million- Northeast was down 11.1% from the year-ago level. That index assets co-operative bank in Lowell, Mass., the fourth-largest city is based on signed contracts for pending sales of existing homes. in the state, northwest of Boston. There, in the last six months or Nationally, the Realtors don’t expect to see a recovery in newso, some area builders have become a greater challenge. But, then, home sales until 2009. Butler Bank has seen all of the ups and downs of this business, In late November, the National Association of Home Builders going back to 1901. reported that October new home sales had increased very slightAt Butler, construction and development financing is the ly—1.7%—versus the previous month, but that it was off 23.5% institution’s bread-and-butter, with construction lending from the year earlier, on a seasonally adjusted basis. The ABA BANKING JOURNAL/JANUARY 2008 23 http://www.realtor.org/ http://www.realtor.org/ http://www.butlerbank.com/ http://www.butlerbank.com/ http://www.nahb.org/
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