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FDIC Slaps Bank – Not Enough Bad Loans

From the Boston Business Journal:

Community bank finds paranoid a smart bet

FDIC begs to differ, tells bank to lend more

Wednesday, March 18, 2009
Boston Business Journal – by Tim McLaughlin

Joseph A. Petrucelli is one of the most cautious bankers in America.

In fact, Petrucelli is so cautious that the Federal Deposit Insurance Corp. recently criticized his bank for not lending enough.

The FDIC’s negative review of East Bridgewater Savings Bank’s loan volume is an anomaly in today’s current banking scene as lenders reel from their role in offering too many cruddy mortgage products to borrowers with weak credit.

Still, the FDIC slapped East Bridgewater Savings with a rare “needs to improve” rating after evaluating the bank under the Community Reinvestment Act

But Petrucelli and his bank occupy the other end of the spectrum in an industry that lost $26.2 billion in the fourth quarter. Even the FDIC’s own deposit insurance fund is in bad need of a boost after paying for an upswing in bank failures.

And then there’s East Bridgewater Savings.

Bad or delinquent loans?




Money set aside in 2008 for anticipated loan losses?


“We’re paranoid about credit quality,” Petrucelli said. The 62-year-old chief executive has run the bank since 1992.

The negative CRA rating, he said, caught him by surprise. The bank received “satisfactory” CRA ratings from the FDIC in 2003 and from the Massachusetts Division of Banks in early 2006.

East Bridgewater Savings ended 2008 with $135 million in assets and deposits of $84 million.

The bank even squeaked out a profit of $87,000. And its Tier 1 risk-based capital ratio was 31.6 percent, or more than three times higher than many community banks in Massachusetts..

But in the eyes of regulators, East Bridgewater Savings looks stingy. Its net loans and leases equaled 21 percent of assets. That compared with 72 percent among 385 savings banks across the country with assets between $100 million and $300 million.

“We want to make loans,” Petrucelli said. “But we also wanted to avoid the next blow up.” …

Just in case anyone had any doubt about the seminal role that the Community Reinvestment Act has played in the current banking crisis.

(Thanks to BillK for the heads up.)

This article was posted by Steve on Wednesday, March 18th, 2009. Comments are currently closed.

16 Responses to “FDIC Slaps Bank – Not Enough Bad Loans”

  1. BillK says:

    From Fox News:

    FDIC Criticizes Massachusetts Bank With No Bad Loans for Being Too Cautious

    A Massachusetts bank that has defied the odds and remained free of bad loans amid the economic crisis is now being criticized by the Federal Deposit Insurance Corp. for the cautious business practices that caused its rare success.

    The secret behind East Bridgewater Savings Bank’s accomplishments is the careful approach of 62-year-old chief executive Joseph Petrucelli.

    “We’re paranoid about credit quality,” he told the Boston Business Journal.

    That paranoia has allowed East Bridgewater Savings Bank to stand out among a flurry a failing banks, with no delinquent loans or foreclosures on its books, the Journal reported. East Bridgewater Savings didn’t even need to set aside in money in 2008 for anticipated loan losses.

    But rather than reward Petrucelli’s tactics, the FDIC recently criticized his bank for not lending enough, slapping it with a “needs to improve” rating under the Community Reinvestment Act, the Journal reported…


    How dare a bank not need the Government’s help!

    Doesn’t the FDIC’s slapping the bank with:

    a “needs to improve” rating under the Community Reinvestment Act

    Reveal the truth that we’ve known all along that the CRA is largely responsible for the current banking industry issues?

    • curvyred says:

      Yes, I believe that proves our point: that the Community Reinvestment Act is responsible for a large portion of our economic state.

  2. wardmama4 says:

    Ah yes the real answer to the CRA and our current bailout woes – and on cue the FDIC (i.e. the Feds) are coming in hard to squash it.

    There is a big push locally for these (even though OH is almost entirely ‘local’ banks anyway) ‘community’ banks – best hedge against so many of the issues wrong in the economy – and I bet The One ™ has appointed his own private ‘czar’ to ferret them out and make them pay for being: Honest, Trustworthy, Financially Responsible & Sound, and Competent. Can’t have that at all – well at least not until the financial wizards of the Klownposse in DC take over.

  3. proreason says:

    Well, The Moron is solving the credit crisis by doubling the national debt.

    He is solving the Iraq crisis by giving the country back to the terrorists.

    It’s only fitting he would solve the bad-loan crisis by demanding more bad loans?

    • GL0120 says:

      Excuse me, but there are no “Terrorists” anymore.
      They’ve all been converted to participants in “Man-Made-Disasters.”
      I suppose the logic (?) is that if we don’t offend their tender sensibilities by referring to them as terrorists, they might refrain from blowing us to hell and back.
      Then again, TCO could have a relative or two involved in the disasters and he doesn’t appreciate then being insulted.

    • take_no_prisoners says:

      This is the equivalent of using passive voice to describe an action. I.E. Mistakes were made. The classic liberal dodge of not specifying the real culprit in a bad situation. This approach allows the individual reading the news to assign the blame to the party he doesn’t agree with politically, rather than the actual culprit. One of the foundations of Bush Derangement Syndrome.

    • Rusty Shackleford says:

      Wasn’t it Barry who originally tried to pay off his Visa with his Mastercard?

  4. Colonel1961 says:

    It just gets old saying this over and over again. Our congress is filled with people who don’t have the slightest clue about business, which, by the way, is the engine that provides all the taxes that liberal lunatics love to spend. CRA is only the latest stupidity from morons who couldn’t be trusted and/or lacked the talent to run an ice cream stand. Yet they make all this outrageous laws that undermine our economy and then blame it on greed.

    The gentleman in the above example is a hero. He ran his business as a business and not some sort of marxist social experiment. Glad to see the tea parties picking up steam. It is time to take America back from our so-called leaders.

    • proreason says:

      Colonel, I think you will enjoy Thomas Sowell’s latest column.


      His key point is that congress took something that was not a problem, “affordable housing”, and made it a huge huge problem. And now they are “fixing” it, which will cause an entire new cascade of problems, some of which could be even worse then the first one they created.

    • Right of the People says:

      Colonel, I’m with you, let’s take this sucker back. Dogpile on Obammy, dogpile on Obammy! Lock and load, I have the feeling it’s going to get full tilt bozo real soon.

    • TwilightZoned says:

      “Our congress is filled with people who don’t have the slightest clue about business…”

      I have always said the exact…same…thing. This is the equivalent of having a lawyer perform an appendectomy. It’s just asking for trouble.

    • take_no_prisoners says:

      This is the classic way that politicians make work for themselves and generate stories that allow them to argue that they must be re-elected. No one ever gets any credit for something that is running smoothly. You must be the hero that solves a crisis otherwise the electorate will look for something new. Therefore, if there is no naturally occurring crisis one must be manufactured so that it can be solved and the politician can take credit. The corollary to this is in order to make yourself look good and your opponent look bad, you must control the definition of what constitutes success and what constitutes failure in such a way that you are always right and your opponent is always wrong. Hence, cheap affordable energy is actually expensive, but expensive energy is actually cheap if we calculate the benefits to the environment to offset the 500% greater cost of green alternatives., etc. The other canard is that we are less safe when we protect ourselves because it angers our enemies and makes them want to get us that much more, therefore we would be safer if we just left the bad guys alone. One could go on and on but you get the picture. One other point is this: A temporary fix that gets a politician re-elected will always be chosen over a better permanent fix that might get a politician defeated, even if it will cost us phenomenally more in the future, when the politician is retired or dead, than the permanent fix would have cost us.

    • proreason says:

      Take_no_prisoners: interesting post. It’s all smoke and mirrors isn’t it?

      I’ve known for a long time that politicians have all sorts of rhetorical tricks that can be studied and learned. The Moron is a master at those since he didn’t have anything else to do the last 20 years.

      But I never focused on the the broader scams of creating crisis, claiming credit and assigning blame that you point out.

      The more you learn about these scumbags, the worse it gets.

      Where’s my pitchfork?

  5. TwilightZoned says:

    Again, a classic example of people getting punished for doing the right thing. Honestly, how far do we really need to fall from grace?

  6. MinnesotaRush says:

    Hmmmmmm. Have we possibly found Geithner’s replacement?

    Ooooops. Sorry. Probably not. He’s likely paid his taxes.

    Never mind.

  7. Liberals Demise says:


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