Reshaped Loans Set Record
The Great Recession is forcing Connecticut banks to restructure a record number of loans as borrowers continue to fall behind on payments.
During the first quarter of 2010, Connecticut’s 55-federally insured banks had $229 million in restructured loans on their books, a 345 percent increase from the year ago period, a Hartford Business Journal computer analysis of Federal Deposit Insurance Corp. data has found.
That number was a slight decrease from the fourth quarter of 2009, when banks had $237.9 million in restructured loans, the highest amount in any quarter in at least 20 years, when the FDIC began tracking the data.
Banks are traditionally hesitant to restructure loans because it reduces the value of their original investment and it can be frowned upon by regulators. But the large amount of economic pain caused by the downturn, including high unemployment and tens of thousands of foreclosures, is forcing lenders to work with distressed borrowers at much higher rates than in recent history, to avoid even larger loan losses.
