Magazine article American Banker

Builders of Chicago in Crater Following a Meteoric Rise

Magazine article American Banker

Builders of Chicago in Crater Following a Meteoric Rise

Article excerpt

Banking history has shown that fast growth can be a fast track to trouble, but that has not deterred Builders Bank in Chicago from increasing its assets tenfold in less than two years.

Now Builders is stuck with $38.8 million of nonperforming loans -- a whopping 12% of its loan portfolio -- and at least one observer is speculating that its days could be numbered.

"I doubt if all the problem loans have surfaced," said Bert Ely, an Alexandria, Va., banking consultant who has accurately predicted past bank failures. "It reminds me of the Texas (savings and loans) in 1983, '84, and '85."

Founded in 1997, Builders had assets of $50 million at the end of 2000. Twenty-one months later its assets had grown to $532 million.

The torrid growth occurred on the watch of Michael C. Winter, hired as chairman and chief executive officer in early 2001. His approach was to build assets by courting brokered deposits and doing aggressive real estate lending; by the end of the third quarter, 99% of Builders' $383 million loan portfolio was in real estate, according to its universal performance report.

But its nonperforming loans have also soared. According to a third-quarter call report filed with the Federal Deposit Insurance Corp. they were up nearly 2,200% at the end of the three months from the third quarter of 2001.

Said Mr. Ely, "You don't increase your loan portfolio that fast and have good underwriting."

Steven H. Baer, vice chairman at Builders, declined to comment on its condition or its plans for solving its credit quality problems. …

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