Bank of Granite Corp., rocked in recent months by troubled real estate loans, said Tuesday that it would cut jobs and suspend its dividend payout to shareholders.
The news is a low point for the Granite Falls bank, a century-old stalwart that has remained independent even as many of its peers were gobbled up by larger players. Bank of Granite, which has paid a dividend for more than 50 straight years, said suspending the quarterly, 13-cent payout would save $2 million each quarter.
Scott Anderson, the chief executive since January, declined to predict when the bank might reintroduce the dividend but said he expected it to be reinstated “as conditions normalize and our credit costs decline.”
The bank also said it expected to cut expenses by $1.5 million in 2009 by cutting jobs and other overhead expenses and by combining its mortgage subsidiary with the bank.
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In an interview, Anderson said the bank has not determined the number of jobs it will have to cut, but is trying to do most of the cuts through attrition. At the end of 2007, the bank had 292 employees; the mortgage subsidiary, Granite Mortgage, had 66. Combining those units, the bank said, would increase capital in the bank and provide more funding for mortgage operations.
To compensate shareholders for the suspended dividend, the bank also announced a 5-for-4 stock split, which means that shareholders will get one additional share for every four they already hold.
“When the stock comes back, shareholders will have more of it,” said Anderson. “We don't feel good about suspending the dividend, but that's what we had to do.”
The bank's stock closed at $7.25 on Tuesday, up 3 percent on a day when the Dow fell nearly 1.5 percent to 10,854.17. Like most bank stocks, it's down significantly from a year ago, when it was trading at about $13.
Bank of Granite lost $3.36million in the second quarter, largely because of its $42million in troubled loans – up 46 percent from the year before. According to data compiled by SNL Financial, Bank of Granite had the second highest proportion of nonperforming assets in the state, behind only Blue Ridge Savings Bank Inc. in Asheville.
Anderson said the bank has been hurt by a forlorn housing market, not poor underwriting standards. In the second quarter, 73 percent of its charge-offs, or loans the bank doesn't expect to collect on, were related to real estate.
At the time, the bank said it was focusing on credit quality and would “continue to work through problem commercial loans in a continued weak economy.”