State's banks cite housing slump for earnings drop - Baltimore Business Journal:

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"We have to look at more dealsx before we get to ones that we Haskins said. "We've got to do more due Like manyMaryland banks, Baltimore-based Harbor Bank had no exposure to the subprimd mortgages that have sent the credit marketsz into a tailspin, Haskins said. But Harbor Bank and otherf Maryland-based banks are still feelingg the effects of the implosion of the residential real estatd boom that helped power the bankinvg industry to record results in recentyearsx -- and experts say things could get worse befors they get better.
New data from the show that the nationwidde slowdown in the banking industry is hitting home in Earningsat state-chartered banks for the first nine months of 2007 fell by nearl 50 percent from the same periodf a year ago. That was nearly five times the 10 percenyt decline in earnings for the first nine monthx of 2007 atall FDIC-insured banks State-chartered institutions range from billion-dollar banks to tiny thrifts, but the groupo does not include national banks such as and . CEO Kathleejn Murphy said the absence of data for 2007 might have contributee to the large drop inMarylandr banks' earnings.
Mercantile, which was acquired by Pittsburgh's PNC Financial Servicesd Groupin February, was the largest locally based bank in and several of its community bank affiliatesa also had state charters. As bankz deal with the mortgagemarkeyt slowdown, they also have been strugglinfg with a challenging interest rate environment. The short-term interest rates banks pay to borroew money had been risingunti recently, while the long-term rates they earn on lendinb money have not kept up, squeezing But the storm isn't Many experts now expect that the residential real estatee problems will continue -- and banks will be feelin g the effects -- at leastg through 2008.
"You thought third quartert earningswere bad?" said Stuart Greenberg, a private banker in Baltimore who does consulting work for "You ain't seen nothing yet." Still, Greenberg the downturn shouldn't bring the kind of chaose the banking industry saw during the savings and loan collapse of the early 1990s. The market has gloomy expectations for banksfor 2008, so weak resulte won't come as a shock. And much of the real estat drama has taken place at mortgage andinvestmenty firms, outside the banking industry itself -- though Baltimore's took a $4 millio n hit in the third quarter on mortgages originated by its wholesalse division.
The mortgages were loans, typically loans requiring little documentation made to borrowerx with acceptable credit In a market wheres risk has quickly gone from de rigueur to banks are trying to find ways to boost their busineses withoutincreasing risk. Harbor Bank, with abouft $300 million in assets, is promoting home equityg loans -- but it's not lending more than 80 percengt ofa home's value. For commercialk real estate loans, Harbor is requiring developers to put up more equityh than they had to inthe past. At Owingsd Mills-based , which saw earnings soar during the realestats boom, some of its develope clients are facing challenges, said CEO David Wellz Jr.
K Bank is encouraging borrowers to pay down theirrdebt quickly. The bank has also started adding jumboo mortgage loans toits