Hurlock Council wrangles with Bank loan proposals

HURLOCK — There was a curveball thrown at the Aug. 25 Hurlock Town Council meeting when the council was asked to consider a proposal from the Hurlock branch of National Bank of Cambridge for the $1.3 million construction loan despite a vote on Aug. 11 to accept Hebron Savings Bank’s proposal.
Hebron’s letter of commitment offered an 18-month $1,396,000 construction loan at a fixed interest rate of 1.41 percent. The last minute proposal by National Bank stated that one condition of the loan would be the transfer of the “deposit balance” currently at Provident State Bank (PSB) to National Bank. According to Tim McCarter, Hurlock branch manager, “they would like to have those deposits because Provident is closing its Hurlock branch.” The interest rate proposed by National Bank matched Hebron’s 1.41 percent but was based on the fund transfer. That rate was reduced from National Bank’s original verbal proposal of 3.5 percent.
Councilman Parker Durham asked for the difference between Provident’s interest rate on savings accounts and National Bank’s. Town Administrator John Avery noted that since the National Bank proposal was received late in the day he was not able to confirm NBC’s rate but it would be lower than the current .19 percent rate at Provident.
Mr. McCarter noted that the low loan rate was calculated on “compensation balances” and the savings interest rate is .05 percent. “That’s how we’re offering the extremely low (loan) interest rate,” he said, adding, “At one time all your deposits were in our bank. It’s good to have relationships with a number of institutions. But that was part of the calculation on rates that allowed us to give you the 1.41 percent loan interest rate. He agreed to call his supervisor to see if the funds transfer clause could be removed and/or the savings interest rate could be raised.
Mr. Avery said the council must consider the town’s investment policy which suggests keeping no more than $250,000 in any one bank. In the past, funds over that amount were not federally insured. Municipalities are now insured over that amount. This proposal would move much of the town’s money, including $760,000 in Provident and $250,000 in Hebron, to National Bank. “We need access to other funds.”
Mayor Joyce Spratt explained that she and Mr. Avery informed Mr. McCarter in person at National Bank that the council had accepted Hebron’s letter of commitment.  Shortly thereafter Mr. McCarter called the Mayor and asked if the bank could “sharpen their pencils” and prepare a second proposal.
Councilman Earl Murphy asked, “How sharp was Hebron’s pencil and why were they able to present it so quickly as opposed to the other two banks. This is a second chance.  Do we go back to Hebron and give them a second chance, too?”
After leaving the council meeting to call his supervisor, Mr. McCarter returned and told the council that neither he nor his supervisor has the authority to change an approved loan proposal. However, he noted “the bank is very, very interested in keeping the money here” and suggested the council accept the proposal contingent on the answers they would receive the next day.
Councilman Charles Cephas moved to accept the proposal contingent on one or both requests: Either not moving the money from Provident to National Bank; or, raising the interest rate to .19 percent. The motion passed 4-1 with council member Bonnie Franz voting “no.”
Administrator Avery asked Attorney David Thompson, alternate town attorney, to review the multi-page document. “I think we should have counsel’s consent before we sign anything on it,” he said.
During public comments the Banner asked how the council can reconcile the evening’s vote to conditionally accept National Bank’s proposal after they had already voted at the previous meeting to accept the Hebron proposal.
Several council members felt the prior vote was to “negotiate” the Hebron loan not to accept the commitment letter. Mayor Joyce Spratt read from the Aug. 11 minutes: “Councilman Rhue made a motion to approve the loan with Hebron Savings Bank with an interest rate of .141 percent to finance the police station” and said all were in favor, no one opposed. Councilman Murphy agreed there was definitely a vote to approve Hebron but felt, “This vote would supercede any other decision because we haven’t signed anything.”
During a recent meeting with the Banner, Administrator John Avery clarified some of the facts and figures associated with the loan proposals and updated the project’s timeline.
He explained, “On Aug. 1 we met with the branch manager at Hebron Bank and provided them with all the financial information that had been provided to National Bank requesting a quote for a loan. On Aug. 6 I had a letter of commitment for an 18 month construction loan at the rate of 1.41 percent fixed or floating at 2 percent under Prime (now 3.35 percent). This information was presented to the council at the regular open session meeting of Aug. 11” at which the council agreed to the Hebron loan commitment.
He said he has met with several banks including SunTrust in Cambridge and Hebron Savings Bank and negotiated interest rates on the town’s savings accounts ranging from .25 to .19 percent. “All of the deposits are insured and liquid,” he noted.
He added, the “funds that they are asking to be transferred to them would total $1,008,528. Deposits at National Bank would total in excess of $1,300,000. That would leave only $330,000 in SunTrust as a contingency fund.”
Total available funds as of the Treasurer’s report through June 17 was $1,701,228.37.

Susan Bautz is a freelance writer for the Dorchester Banner.

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