New Jersey - Banks Seek Millions From Fraud Defendant

New Jersey - Some New Jersey banks have filed tens of millions of dollars in claims against a Monmouth County real estate developer facing fraud charges. If any of the loans to developer Solomon Dwek are unsecured, some banks could take significant hits to their earnings, says Al Savastano, an analyst at Janney Montgomery Scott.

Savastano said in a note to investors: "We believe most of the loans are collateralized by real estate."

Yardville National Bank has the largest claim, $23.6 million. The bank's CEO, Patrick Ryan, said that 90 percent of the claim is "very well collateralized." Savastano had said that in a "worst-case scenario," in which the loans are unsecured and written off, Yardville's loss would reduce the bank's estimated 2006 earnings by more than two-thirds.

If Valley National Bank loses its entire $9.4 million claim, it would reduce its 2006 per-share earnings by 3.6 percent. A Valley official said that such a loss would be very unlikely.

Oak Ridge-based Lakeland Bank's potential $2.1 million loss would reduce its per-share earnings by 6.8 percent.

Pittsburgh-based PNC filed a $21 million claim against Dwek. Washington Mutual, based in Seattle, has filed a claim for $14.8 million. For those larger banks, the impact to earnings in a worst-case scenario would be a fraction of a percent.