The Cooperative Bank of Concord is restructuring operations by cutting 9% of its employees, dumping an unprofitable mortgage banking business, and consolidating several other divisions.
The Acton, Mass.-based bank said it will save as much as $1 million by cutting 27 retail, finance, and administrative management positions.
The bank also said last week it will take a $500,000 pretax charge in the fourth quarter, which will reduce earnings by nine cents a share.
The $780-million-asset institution is also consolidating its remaining operations into four major divisions: commercial lending, consumer banking, legal/administration, and finance/operations, all led by senior vice presidents reporting directly to chairman David E. Bradbury.
The changes are designed to "improve and speed our decision-making process, (and) exit an unprofitable line of business," said senior vice president of consumer banking Lisa Bergemann.
At the same time, the bank is expanding its commercial lending operations, which it acquired with its purchase last June of Depositors Trust Co. Cooperative now has $13 million of commercial and industrial loans and $78 million of commercial real estate loans.
"What we're hoping to do is beef that up and continue to grow that portion of the business," Ms. Bergemann said, adding that the bank will also offer construction lending. "It will become much more prominent going forward."
The bank is also eliminating its struggling mortgage banking business, which lost money in 1994 for the first time in 20 years. The company declined to reveal the size of its losses, but officials said they believed that higher interest rates and changes in the industry would lead only to more losses.
The decision to get out of mortgage banking is "really the end result of a lot of analysis we've done over several months," Mr. Bradbury said.
"There's really been a fundamental shift here in the mortgage banking business and when the market improves for mortgage banking, (it) may improve in a disproportionate way to the big lenders," he said.
He explained that with interest rates rising, lenders are now offering adjustable-rate mortgages and booking them on their balance sheets, since they don't sell as well as fixed-rate products on the secondary market. And many of Cooperative's larger competitors have begun offering teaser ARMs with below-Treasury yields, which the thrift can't compete with.
"I'm convinced that originating mortgages in our mortgage banking business was not profitable during 1994 and those same factors are evident for 1995," Mr. Bradbury said. "I don't know many people that claim that their mortgage banking business is profitable at this stage."
Cooperative will keep its $650 million mortgage servicing operation, and will still make portfolio mortgages through its branch network in eastern Massachusetts. The bank is the ninth-largest residential lender in the state, according to Banker & Tradesman, a weekly eastern Massachusetts newspaper.
"In essence, it's just a very sound business decision," said James Moynihan, senior vice president of Advest Group in Boston. "When you analyze your lines of business as a businessman and you can't see one of those lines bringing anything to the bottom line, the best thing to do is walk away from it. . . ."
