Saturday, May 2, 2009

Enabling pain

Apologies for the lack of posting recently. I have been working 60+ hour work weeks since the end of March. Between that and family obligations, there has been precious little time or energy to blog. I anticipate a bit better posting frequency after mid-May. Thanks for your patience!


San Joaquin Bancorp Reports 1st Quarter Results

Part of what stood out was this section. They wrote it - I merely copy/paste, and add a little bold text to help focus the mind:

Asset Quality
“Classified loans” are the loans and other credit facilities that we consider to be of the greatest risk to us and, therefore, they receive the highest level of attention by our account officers and senior credit management officers. Classified loans include both performing and nonperforming loans. During the 1st quarter of 2009, the Company continued to closely monitor all of its more significant loans, including all loans previously classified, due to heightened credit risk primarily in the real estate development market within the Company’s primary market area, concentration risks, and more general concerns about the economy.

At March 31, 2009, the Company had $105.5 million in classified loans compared to $20.0 million at March 31, 2008. Of these loans, at March 31, 2009, $43.9 million were accruing loans that were not impaired and $61.6 million were deemed impaired. A loan “impairment” is a classification required under generally accepted accounting principles when it is considered probable that we may be unable to collect all amounts due according to the contractual terms of our loan agreement. Impaired loans can be further categorized as performing or non-performing. Non-performing loans include loans past due 90 days or more that are still accruing interest and nonaccrual loans. At March 31, 2009, we had $45.1 million in non-performing impaired loans. This compares to $5.1 million in non-performing loans at March 31, 2008.

Non-performing loans as a percentage of total assets at March 31, 2009 and 2008 were 5.07% and 0.56%, respectively. The Company had restructured loans, included in impaired loans, of $1.6 million at March 31, 2009 compared to no restructured loans at March 31, 2008. There were no foreclosed assets at either reporting date.

Included in the $61.6 million balance of impaired loans at March 31, 2009 are $43.5 million of construction and land development loans in Kern County, which were previously identified in the 4th quarter of 2008 as “impaired” due to declines in real estate collateral values associated with those loans. Compared to the impaired loan balance of $66.9 million reported for the period ending December 31, 2008, impaired loans for the 1st quarter of 2009 decreased by $5.3 million from payoffs of certain of those loans. However, due to further declines in real estate values associated with existing impaired loans that were identified in recent appraisal information, the Company allocated an additional $8.9 million as a specific valuation reserve for the 1st quarter of 2009, which is included in the total amount of the Company’s allowance for loan losses, which is discussed further herein.

Quite the turnaround from a year ago.

Also worth noting: The requirements set forth in the Federal Reserve Bank's Enforcement Action (April 7, 2009) occurred right after the reporting period (Jan1-March 31, 2009) ended. Funny, that.

Inquiring minds might be wondering if the FRB had any influence on the fact that the bank set aside $10,688,000 for loan loss reserves in Q1 2009, as opposed to the paltry $110,000 set aside in Q1 2008. Bakersfield Bubble pointed out one year ago that considering the epic financial crisis banks were facing, the tiny provisions for losses seemed a bit odd compared to their peers.

It will be interesting to see:
  • How the Q1 results affect this lenders' stock price on Monday, and
  • Whether meeting the upcoming requirements of the FRB Enforcement Action will affect the lender in a positive or negative way in Q2.