From the Record:
In banking, OREO is not a cookie, and there’s no sugary frosting in the middle.
It’s an acronym for one of the industry’s most unpleasant statistics, Other Real Estate Owned, which means repossessed homes and commercial properties. And it has been on the rise in North Jersey.
Repossessed homes and commercial properties held by the 10 largest commercial banks based in Bergen and Passaic counties nearly doubled to $53.3 million from $27.3 million in the past year, according to The Record’s analysis of financial reports filed quarterly with the government.
These include properties that banks acquired in sheriff’s auctions because the bids made were too low to cover the loans. They also included properties where distressed owners voluntarily signed over the deeds.
An increase of that size is “certainly not good,” said Rick Weiss, an analyst with Janney Capital Markets. “I think the rate [of bad loans] going in is probably slowing, but things aren’t being cleared out fast enough.”
Bauer said recently that 12.7 percent of New Jersey banks were “troubled or problematic” as of the end of 2011, up from 7.8 percent at the end of 2010. The ratio of troubled or problematic banks declined nationwide during that time to 11.1 percent from 13.2 percent.
John McWeeney, president of the New Jersey Bankers Association, said New Jersey-based banks “are still relatively strong compared to other areas of the country” and their capital levels are “solid.”
Wayne-based Valley National Bank’s holding company said in a filing with securities regulators that its increase in OREO last year was largely due to one commercial property with a value of $3.5 million, which the bank acquired in the third quarter. The dollar value of Valley’s OREO rose to $21.7 million last year from $18.3 million.
At Edgewater-based Mariner’s Bank, OREO increased to $8.7 million from $1.5 million, attributed entirely to repossessed commercial properties.
Community Bank of Bergen County’s OREO increased more than tenfold to $6.4 million from $604,000, with residential mortgages accounting for more than $5 million of the year-end total at the Maywood bank.
“A lot of what you are seeing now is loans that went bad in 2008 and 2009,” said Nicholas Ketcha, a managing director of FinPro in Liberty Corner. “It’s taken that long to get the properties to where they can take control.”