Still lending a hand in old neighborhoods; Banking: The dwindling ranks of small lending institutions, forgoing bigger profits, choose to focus on helping their neighbors buy homes and pay the mortgages.

THE BALTIMORE SUN

Time doesn't quite strike true at the Hull Federal Savings Bank, a Locust Point rowhouse office with a varnished plywood teller counter where computers work in tandem with an old Royal typewriter.

These idiosyncrasies have seeped into the bank's operating system, which leads past president and current financial officer Wilbur Baumann, 83, to declare: "We stopped taking new customers."

Baumann, who's been there for 48 years, knows the bank could make more money, but he said Hull Federal is organized to help people buy houses and pay for mortgages. And he's more concerned with keeping the institution, which has $8.3 million in assets, financially sound than with continuing the profit hunt.

Established in 1911, Hull Federal is one of a handful of small banks and savings and loans that have survived the onslaught of mega-banks -- and the savings and loan crisis in the 1980s.

Lenders such as Hull, Golden Prague Federal Savings & Loan Association and Kopernik Federal Savings Association cropped up in tightly-knit ethnic neighborhoods with the focus of helping their fellow countrymen and neighbors buy their first homes.

Many have almost fabled immigrant beginnings in which a baker or a grocery with a bit of extra cash would lend money to neighbors to purchase homes. Others started as families pooling their money to buy each family a home.

Some customers still have thin, weathered payment books used when relatives would walk to stores serving as banks to pay a quarter or 50 cents a week to pay off a mortgage.

Such nostalgic enclaves aren't just fodder for great storytelling in a banking world where merging is seen as an act of survival. The officers of small banks believe that some customers still want the old-time service, even if that means missing out on the lowest mortgage rate. While the customer base has broadened, the emphasis on homebuyers remains unchanged.

In the name of customer service, many of these banks stubbornly hang onto the practice of not selling mortgages on the secondary market, as many lending institutions do.

"We're not interested in selling and getting the quick money," said Michael Baumann, a director with Hull Federal and Wilbur's cousin. "We work with people."

With a wry smile, Michael Baumann recalled articles in financial magazines about the growing recognition that a little hand-holding can avert a foreclosure. At Hull Federal, the staff may work with a struggling customer, a neighbor who has been banking there for generations.

"We've only had one foreclosure since 1911," said Wilbur Baumann. "And that was the undertaker, and he died. We have never penalized anyone."

In Baltimore, these small, independent banks function somewhat like institutions found mainly in rural communities. Michael Hindman, president of ICBA Mortgage, a subsidiary of the Independent Community Bankers Association, estimates that 90 percent of the group's 5,300 members maintain their own mortgage portfolios.

"The bedrock of community banking is its customer relationships," Hindman said.

For the last 25 years, the secondary market has been growing to a point where more mortgages are being sold then being kept.

Alan Ingraham, vice president of MNC Mortgage Corp. in Lutherville, said neighborhood lenders are focused on the community they serve. They know the risk of making the loan, whereas larger mortgage companies have a need to "balance their regional risk and the diversity of their portfolio."

Baltimore is a city of small neighborhood and ethnic banks, mainly because it's a metropolitan area of neighborhoods, a good breeding ground for small institutions.

Despite all the talk of a changing Baltimore, Ingraham said, the city is still provincial to an extreme, more neighborhood-oriented than other industrial cities such as Philadelphia and Boston.

Layers of municipalities

Baltimore doesn't have the layers of municipalities like Philadelphia with its incorporated townships and boroughs. So it's harder for larger banks to come in and buy the neighborhood banks that Ingraham estimates occupy 35 percent to 40 percent of the local market.

"I don't think [neighborhood banks] are facing extinction at all," Ingraham said. "I consider them as a very viable competitor."

Golden Prague President Joseph Platek is hoping to reap the benefits of a backlash against the continual merging of financial institutions. He said as large banks add more fees and red tape, customers long for the personal services that they no longer have access to.

Golden Prague, on McElderry Street, also is sticking to the practice of keeping mortgages it originates. In doing so, it continues to have direct access to customers -- and customers know their mortgages will always be handled in-house, causing less hassle should a question arise.

Platek said Golden Prague is more willing to make the small loans that larger institutions pass over, since larger banks consider them not cost-effective. And if a customer is having financial trouble, Golden Prague has more leeway to avoid a foreclosure, such as allowing the borrower to make interest-only payments, since the bank owns the mortgage.

Delving into gray areas

"[Larger banks are] strictly going by black and white, where we can delve into a gray area," Platek said.

Founded in 1912 on $200,000 in assets, Golden Prague has $33 million in assets that produce $4 million to $5 million in annual mortgages. Platek, whose father and grandfather were bank presidents, acknowledges his bank, overall, can't compete with the range of services offered by corporate banks -- nor can it offer the low rates.

So rather than worrying that Golden Prague doesn't have an automated teller machine or a marketing department, Platek says small banks still believe that some people want to talk personally to the bank president about their mortgage.

"This has always been a hallmark of the savings and loans," Platek said. "You can reach a warm body instead of a menu."

But by not selling mortgages, some banks are missing out on good loan packages and a chance to replenish their reserves.

Gilbert Marsiglia of the Gilbert D. Marsiglia Real Estate Co. and past president of the Greater Baltimore Board of Realtors said smaller banks may thrive on the neighborhood customer, but they have the risk of carrying the mortgage.

Marsiglia said small banks are gambling if they keep traditional 30-year mortgages, betting that interest rates don't go up.

Banks that sell the 7 percent mortgages on the secondary market are protecting themselves if the economy has a downward turn and interest rates climb well above what is standard for today.

At the same time, however, Marsiglia says, "I tell my customer to pay a little bit extra to go to a bank that doesn't sell their loans, because it's a hassle to deal with out-of-state mortgage companies."

30-year mortgages sold

Wyman Park Federal, established in the neighborhood in 1914, moved to Lutherville in 1952. It retains its 15-year, balloon and adjustable-rate mortgages. But it sells its 30-year mortgages because it ties up too much cash, said bank President Ernest Moretti.

He said many banks can continue to service the loan after it's sold, which should appease the customer.

Community banks have survived by having the ability to identify trends and to adjust to an economic climate that their 19th-century counterparts would hardly recognize. Yet, as the century concludes, the role remains unchanged.

One of the more unique evolutions has been that of Homestead Mortgage, which recently bought the Reisterstown Road mortgage office location from Columbo Bank.

Unfolding in this Pikesville office is the classic Russian emigration story that's nurtured by newcomers who can't speak English, but are on the cusp of becoming homeowners.

This is where Irina Kantorovich, a Russian-born loan officer/branch manager, comes in.

"They would rather deal with us," she said. "We understand what kind of visa they have. We know this. We went through all this system."

It's estimated that 7,000 to 8,000 Russian Jews have emigrated to the Baltimore area since 1989, taking advantage of the strong Jewish community that has long been in place here.

Last year, the office processed 468 loans -- not bad for a branch that Kantorovich started by herself four years ago.

She said the branch's success is due to trust that has taken root in the community, after publishing articles in Russian-language newspapers and conducting seminars.

"Regular investors don't understand how people from different countries survive and buy houses," she said. "We understand everybody's story."

Although Emma Lebedev came to this country as an accountant seven years ago from Ukraine, she was thankful she met someone like Kantorovich when buying her first home in 1995.

Growing up in Ukraine, Lebedev said, she had no knowledge of mortgages. But for Lebedev it wasn't the concept of buying a home that was hard. The number of finance packages being offered was overwhelming.

Customers move away

One secret to an neighborhood bank's survival is its ability to adapt to customers moving away.

Kopernik is still in Highlandtown and proudly touts its ties to the neighborhood.

"There's a lot of good things developing in the area, but we have our problems," said Gary Amereihn, president of Kopernik. "For the time being, I feel very comfortable here."

Then there's the future of Golden Prague. The bank is seeking opportunities beyond its customer base. It originally served a Czech and Bohemian community that has long been dispersed.

Platek said the pressure is on to open a branch in the Belair and Harford roads corridor. Some former residents, Platek said, are afraid to come back into the city. But for the faithful customers who choose city living, the old-time banks are a throwback.

When Mary Koch needs to reach Hull's bank, the Locust Point resident just does what she's been doing for decades. She leaves her house and walks around the block to Hull's bank, barely distinguishable among the Formstone rowhouses.

Koch, 87, is living in the house her father bought through Hull. Her sons and grandsons have also done business with the bank. In the early part of the century her neighborhood of Locust Point also served as an immigration center. Thousands of new Americans have gone through what was known as the "other Ellis Island." Some of them stayed.

For these newcomers, Irish, Germans, Poles and Russians, Koch says, small banks like Hull gave them their financial start.

"The whole neighborhood used it, because those [bank] people were honest," she said.

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