Magazine article American Banker

Pa.'s Willow Grove Back in the Hunt for Big Borrowers

Magazine article American Banker

Pa.'s Willow Grove Back in the Hunt for Big Borrowers

Article excerpt

Willow Grove Bancorp Inc. in Maple Glen, Pa., is starting to make more big commercial loans, even though its asset quality is showing signs of weakening.

In its annual report, published Monday, Willow Grove said that after largely swearing off business loans of more than $250,000 for the past two years, it would begin to "gradually increase" originations this fiscal year, which began July 1.

It went on the diet after weathering a significant upsurge in bad business loans in 2001; since then, it has made just 10 for more than $250,000, and each of them got prior approval by the board of directors.

Over the past 12 months the $845 million-asset company has hired a chief lending officer and a credit risk manager, who is overhauling its loan review function. It maintains that the two hires put it in a position where it could safely resume making the larger loans.

Willow Grove said it prefers bigger loans, because they are more profitable and typically carry adjustable rates and shorter maturities, so asset-liability management is easier.

But in a research report published Tuesday, Robert Hughes, an analyst with Keefe, Bruyette & Woods Inc. in New York, questioned the decision. He noted that payments on an $849,000 commercial loan -- the largest in Willow Grove's commercial and industrial portfolio -- were more than four months late as of Aug. 31.

Willow Grove's annual report stated that the borrower "is experiencing financial difficulties." It also disclosed that the duration of the largest construction credit, totaling $4.3 million, has been extended once and may need to be extended again. The first extension will run through the end of this month; the second would expire three years after that. The loan, on a half-vacant office building in Willow Grove's core market of Montgomery County, is now classified as substandard. …

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