Operational Losses At First Federal Draw Heightened Regulatory Scrutiny

by George Waldon  on Monday, Dec. 14, 2009 12:00 am  

Total nonperforming assets and performing restructured loans of $101 million at Sept. 30 were written down to nearly $80.9 million, about 11 percent of total assets.

That write-down total compares with $55.7 million at year-end 2008, about 7 percent of First Federal's total assets.

Boosting loan loss reserves was the big-ticket item behind the company posting a whopping $23.2 million loss for the third quarter.

"We took a big hit, but we were aggressive in building up our loan loss provisions and doing what we needed to do to clean up the balance sheet," Brandt said.

He said paring its portfolio of real estate has become a focal point for First Federal management.

"That's a priority for us," Brandt said. "We're fortunate in that we don't have a $10 million or $12 million project we have to work through. We're not at a level we can't work out."

Real estate-backed loans totaled $517 million at the end of the third quarter, a decline of $24 million compared with nine months earlier.

Back in the Day

During the 1980s, venturing into new markets was encouraged by regulators who advised First Federal and other lenders to broaden their horizons if local loan demand wasn't good.

"Needless to say, everything went good for awhile and then the participation loans collapsed regionally," Brandt said. "We had our lumps then and worked through it. We had some losing years, but recovered and got through it by the early 1990s."

First Federal, one of only six remaining Arkansas thrifts, finds itself working with regulators and sorting through a tangled loan portfolio along with lenders around the nation.

"We're like most banks; we're trying to control our growth," Brandt said. "We're not going to be doing any new branching in northwest Arkansas. We've done all we're going to do in the near future.

 

 

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