Shaken, but still holding on

The small community bank had a growing number of loans that became seriously delinquent as the economy and the housing market sputtered. One borrower, the developer of a three-unit condo project, had trouble selling units. Another, the owner of a commercial building, fell behind on his payments after several tenants vacated and he was left with empty storefronts. The bank said it foreclosed on more than a half-dozen properties in December alone. Until the recession, it went for more than a decade without any foreclosures at all.

“It’s the worst year in our history,’’ said Stoneham Savings Bank president Richard M. Donovan. “There’s been nothing like this.’’

So far, banks in New England have weathered the financial crisis and recession better than in most of the country. Of the 140 US banks seized by regulators in 2009, none were in Massachusetts or any other New England state.

But a handful of local banks, including Stoneham Savings, are struggling with delinquent loans and dwindling capital reserves, raising the question of whether a bank could eventually fail here, too. As of the end of September, eight banks in New England, including Stoneham Savings, were no longer considered to be well capitalized, a key indicator that a bank is healthy, according to the latest data available from the Federal Deposit Insurance Corp.

“It would not surprise me if we did have a failure or two in the region,’’ said Suzanne Moot, a banking consultant with M&M Associates in Milton. “Given the depths of the recession and the challenges bankers everywhere are wrestling with, it’s quite an amazing feat that only a handful of banks are even experiencing moderate levels of problems.’’

Stoneham Savings Bank officials say it is slowly working through its problems and is not in danger of being taken over by regulators.

“The vast majority of Massachusetts state-chartered banks remain healthy and well capitalized,’’ said Steven Antonakes, the state’s banking commissioner.

Indeed, some local bankers noted that they continue to outperform their peers in other states. In the third quarter of 2009, only 17 percent of Bay State banks were unprofitable, compared to 27 percent of banks nationwide.

“We’re doing well, considering the depths of the recession,’’ said Dan Forte, chief executive of the Massachusetts Bankers Association.

Moot said one reason is that the housing market was never as frenzied in Massachusetts as it was in such areas as Florida and Nevada. And she said New England bankers tend to be conservative, so they were less likely to offer exotic mortgages to people who could scarcely afford the payments.

Smaller banks tend to be more vulnerable to problems, as just a few bad loans can upset their balance sheets. But even troubled Massachusetts banks have found ways to avoiding being seized by regulators.

Several, for instance, have struck deals to sell themselves. For instance, Mt. Washington Cooperative Bank in South Boston recently agreed to become part of Meridian Interstate Bancorp, owner of East Boston Savings Bank. Strata Bank in Medway sold itself to Middlesex Savings Bank. And with the help of regulators, Lowell Co-Operative Bank made an agreement to sell itself for $8 million to a group of investors.

In addition, Butler Bank in Lowell, which last year was cited by regulators for a number of problems last year, has been trying to find a stronger institution to take over the bank. Butler president Janet Bruno recently said the bank was in negotiations with a potential partner.

Other banks are working with regulators to strengthen their balance sheets. David W. Curtis, president of Community Bank in Brockton, said the bank has filed a plan with regulators to boost its reserves and expects to be well capitalized again in a year or so. The bank has taken steps to improve its profitability, issue fewer new loans, and sell some of its existing loan portfolio.

“We’re right on schedule,’’ Curtis said. “We’re doing quite well.’’

Some banks say they are doing better than it may appear. South Costal Bank of Rockland was one of the eight local banks with low levels of capital at the end of September. But Bank chief executive Robert Fraser said the data is misleading, because the bank temporarily shifted some assets to a sister bank in Western Massachusetts. Fraser said the bank’s parent company, MountainOne Financial Partners, had more than enough capital, and it has since added more capital to South Coastal’s accounts.

“We are well above the ratios,’’ Fraser said. “It was just a temporary blip.’’

Even if a local bank collapses, depositors would likely be fully protected. The Federal Deposit Insurance Corp. guarantees up to $250,000 per depositor. And state-sponsored funds generally insure the rest at most local banks, including Butler Bank and Stoneham Savings.

Stoneham Savings, not to be confused with neighboring StonehamBank, says it is steadily making progress in improving its balance sheet. Bank president Donovan said the company bolstered its capital by selling four foreclosed properties this month, and it has worked out deals with other borrowers. One developer, who was delinquent on a $1.5 million loan, was able to pay back the bank after he sold the remaining condo units that were sitting on the market.

“I am very pleased with what we have been able to accomplish,’’ Donovan said. “I am encouraged that we will be able to work through all the problems.’’

Todd Wallack can be reached at twallack@globe.com.