Empty Bank Branches Add To Supply In Retail Real Estate

The ruins of Washington Mutual's aggressive and unorthodox growth strategy is no more apparent than in the Windy City, where roughly 75% of the bankrupt bank's branches have gone dark.

It's a stark harbinger of what looms ahead for recession-battered retail real estate. A growing number of vacant branches being dumped on the market due to mergers and Chapter 11 filings are poised to push vacancy rates higher and exacerbate weak property values.

During boom times, WaMu opened about 170 branches in the Chicago area. The growth spurt underscored the Seattle company's ambition to be the Wal-Mart of retail banking. WaMu attempted to build a presence in "Chicagoland" from the ground up by opening brand new branches to attract customers. It was a nontraditional strategy given that banks usually purchase an existing bank or branch network to expand into new regions.

As WaMu struggled, it shuttered about 60 branches in Chicagoland before it went bankrupt and was acquired by JPMorgan Chase & Co. (JPM) earlier this year. Subsequently, JPMorgan Chase closed about 70 more branches in the area, leaving only 40 of the original WaMu branches open, a company spokesman confirmed. Nationwide, Chase has closed nearly 400 one-time WaMu branches. . . . more

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Eastern shrinks despite MassBank buy

When Eastern Bank agreed to buy MassBank Corp. in early 2008, Chief Executive Richard Holbrook envisioned a combined operation with $7.6 billion in assets. But the largest community bank in Massachusetts didn’t get bigger in 2008. It actually shrunk.

Even after completing the deal for MassBank and its $821 million in assets, Eastern’s year-end assets were $6.55 billion, compared with $6.8 billion in 2007. That’s far short of the $7.6 billion Holbrook expected in March when the MassBank deal was announced. Meanwhile, full-year net income fell 91 percent to $5.8 million. The bank’s balance of net loans was $3.87 billion at the end of December, down from $3.98 billion a year earlier. And losses on investments totaled $50.4 million as Eastern’s bets on the stock market took a beating like everyone else’s.

To be sure, Eastern Bank has been a prudent lender. It has plenty of capital ($654.4 million) and its pool of problem loans is small. The bank also pared back some lending in riskier segments and didn’t chase after expensive deposits with full-page newspaper ads touting sky-high CD rates.
“We’re not going to match every other competitor’s offer to hold onto deposits,” Eastern Bank spokesman Joe Bartolotta said. “We have an obligation to run a profitable operation.”. . . more

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