ABA Banking Journal - November 2007 - (Page 22)

Community Banking and tourism, both of which can be cyclical, and, in the case of the latter, somewhat dependent on the weather. A bad snow year can hurt ski operators, for instance. Diversification demanded branching, pure and simple. The need to branch—and branch at long distance, given the shape of the state—was what first brought Tibbetts to the organization in 1997. He came aboard to open and establish the bank’s Concord office, and became CEO in time. The bank found it had to move downstate from the North Country region—which gave management the idea for its nickname, “The Moose Bank”—in order to find growth opportunities. In 2003 the bank moved into Amherst and in 2007 into Portsmouth. As the bank expanded its reach, Tibbetts’ attention was drawn again to manufactured housing loans. The bank has long done the occasional manufactured housing loan as an accommodation to customers, says Tibbetts, but in 2000 he decided this was a specialty that could be a decent niche for the bank. Increasingly, he says, service workers in some of the state’s larger towns, such as Amherst, cannot afford to buy site-built housing, so strong has been the appreciation in prices. And retirees trading down and wanting to move to smaller housing units often found themselves looking at manufactured housing, rather than traditional units. So Tibbetts decided that staff would go after manufactured housing loans, and make a scientific business of it. The bank lends on both new manufactured homes as well as used units. One stipulation is that the bank won’t lend on units that pre-date the 1970s, unless the borrower has very strong credit. Key quality improvement standards from the federal Department of Housing and Urban Development that now apply to manufactured home construction weren’t in place when pre-1970 homes were made. Where the prospective borrower plans to have the home sited at a mobile home park, the bank generally likes to send a loan officer to the site to see what the park is like. The bank has been making so many manufactured home loans that employees have grown quite familiar with the many parks in the state, Tibbetts adds, so visits aren’t always necessary. There’s a stress on getting to know the park operators, and how well they manage their properties. The bank also lends on manufactured homes that are going onto land that the borrower owns themselves. Terms will run as long as 20 years, and the bank generally finances for 80%-85% of home value. Mortgage insurance is only required on a case-by-case basis, and the bank portfolios the loans. Most normal mortgage compliance—flood checks, title far out on a limb, as these must be good loans. The bank isn’t after any subprime situations. Being lower in cost than sitebuilt homes—Tibbetts puts them at between $30,000 and $40,000—the homes produce smaller loans, which have a relatively short life, compared to many home mortgages. As a matter of fact, Tibbetts says that only one loan has ever wound up in foreclosure. In that case, he says, the borrowers’ personal situation became quite messy, and that, more than the underlying credit, contributed to the loan’s going bad. In recent years, much as regular homes, Tibbetts has found the value of the factory-built units to be increasing. More recently, the values have been leveling off, in tune with the general real estate market trend. Still this marks a sea change for these units. Tibbetts recalls that they used to behave more like cars, depreciating in value as soon as they left the plant. “But that turned around a lot in the last 15-20 years,” he says. Developing this expertise has also paid off in larger loans. Tibbetts explains that many of the state’s mobile home parks have gone “co-op,” just like formerly rental apartment buildings. When the homeowners’ association is organized to buy the property from the original owner, typically it requires credit to finance the acquisition. Though some parks are so large that the bank finds the loans too large for its limits, First Colebrook has picked up some good association loans in this way. In addition, where the homes are sited on individually owned land held by the homeowner—as opposed to co-ops or parks—the bank has also offered home equity loans. Other cross-selling becomes possible, as well, once the bank has established a relationship by making the home loan, says Tibbetts. Deposits are a natural, for instance. In addition, the bank is fulfilling a community need, which pleases Tibbetts. “It’s not the most profitable activity in the bank,” says Tibbetts, “but I couldn’t understand why nobody was doing these loans.” BJ Community Banking continues, p. 24 First Colebrook—”The Moose Bank”—found a home in lending on both new and used manufactured homes throughout New Hampshire. search, etc.—are also performed on these credits. The bank makes only conventional loans here, no FHA or VAs. Rates are currently in the range of 8%-9%, with the bank charging one point up front. Results of the outreach Between word of mouth, connections to dealers and park owners, and some light advertising, the bank is making these loans all over New Hampshire, now. To date, First Colebrook has made more than 400 of these loans, a mix of smaller and larger units, with 60% of the homes being used and 40% new. Tibbetts says the portfolio has been extremely clean. “We don’t take a lot of flyers,” he admits, stressing that the bank won’t go too 22 NOVEMBER 2007/ABA BANKING JOURNAL www.ababj.com/subscribe.html http://www.ababj.com/subscribe.html

Table of Contents Feed for the Digital Edition of ABA Banking Journal - November 2007

ABA Banking Journal - November 2007 Contents Editor’s Column Briefing: Good News for Mortgages Sleight of Mind N.Y. Hiring Bonanza May Be Bane Snapshot: A Look at Held-For-Investment Loan Growth ABA Resources ABA Chairman’s Position “The Moose Bank” Thrives on Manufactured Housing Loans Finding the Middle Way for Your Bank’s Retirement Program Pass the Aspirin Cover Story: Self-Service Steps Up DIY U.K. Style Marketing to Millennials Getting Real With “Gen Wired” Ethnic Marketing: Disinterested Banking Getting Good at Global Sourcing Case in Point Turn Compliance on It's Head Banker’s Mart To Advertise/Index of Advertisers The Economy

ABA Banking Journal - November 2007

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