Northern Mich. bank sues some of biggest customers
Monday, September 17, 2012
TRAVERSE CITY, Mich. (AP) — Northwestern Bank has filed suits against an interlocking group of companies linked to one family in an effort to recoup $30 million in loans for various real estate and other projects.
The Nielson family's businesses are one of Northwestern Bank's major commercial customers and account for most of the northern Lower Peninsula bank's bad loans, the Traverse City Record-Eagle (http://bit.ly/ORr4dV) reported. It said the bank filed suit in 2011 against a dozen limited liability companies involved with Generations Management LLC and Generations Realty, which are owned by the family.
The Nielsons' bad debt accounts for most of Northwestern's $50 million in non-accruing loans, those in which interest and principal payments haven't been made in 90 days.
Those loans have led to downgrades of the bank's own ratings, despite the bank's overall profitability of $2.74 million in the first half of 2012.
The bank tries to work with its customers to avoid foreclosures, which has put it behind other banks that already cut their foreclosure-related losses, spokesman Doug Zernow said.
"If we had foreclosed on a number of loans earlier on and (got) them off the books, that actually improves the appearance of the bank and probably helps your star rating," Zernow said. "But we're a community bank. Foreclosure is not part of our business model."
Zernow said the recent flurry of foreclosures an "anomaly."
"This particular group of foreclosures we've been trying to work things out for a long time," Zernow said.
He declined to discuss details of the lawsuits or Northwestern' s relationship with the Nielsons.
Cori Nielson, of Generations Management, said the relationship with Northwestern is over and "unrecoverable."
The country's economic collapse contributed to, but was not the main reason behind the loan defaults, Nielson said.
"Nearly all of our portfolio loans with Northwestern matured in 2010," Nielson said. "Unfortunately, we were unable to get renewals on acceptable terms."
Northwestern's proposal doubled Generations' debt service and was an "all or nothing deal," she said.
"We wrote off all of these properties almost a year ago, so we moved on," Nielson said. "It wasn't pleasant, but we made the appropriate choice under the circumstances."
Information from: Traverse City Record-Eagle, http://www.record-eagle.com