One Problem Loan Leads to Larger Net Loss for 1st Pacific

1st Pacific Bancorp blamed most of its amended $21 million net loss for 2008 on a single, unsecured land development loan that it had to classify as charged off or uncollectible.

The problem loan of $6.9 million was for a residential/commercial development in Riverside the bank attempted to work with, but still went south, the holding company for 1st Pacific Bank of California said March 26.

Ron Carlson, 1st Pacific’s chief executive, said the bank agreed to extend the terms for the developer, but that required making a partial repayment. When that didn’t happen, the bank was forced to reclassify the credit as a charge off.

What has to hurt even more is the fact that 1st Pacific, with $400 million in assets and eight offices, is not holding much collateral on the loan.

Carlson said the bank has an option to acquire the property, but for all practical purposes, the loan is unsecured.

The bank’s restating earlier results pushed up the total of charged off loans to $15.4 million, and increased its 2008 net loss to $21.8 million, compared with an earlier reported net loss of $14.9 million. In 2007, 1st Pacific reported net profits of $2.5 million.

The heavier loss also damaged the bank’s capital base, shrinking total risk-based capital to 8.73 percent, and its Tier 1 leverage ratio to 5.39 percent. Both ratios are above the regulatory minimums of 8 percent and 5 percent, respectively, but below the standards for a well-capitalized bank.

Carlson said his bank is exploring a number of ways to beef up its capital base, including applying for federal money through the Treasury Department’s Troubled Asset Relief Program, or TARP.

While it’s dealing with higher amounts of problem assets (now at $13.6 million, or 3.54 percent of total assets), Carlson said he didn’t think his bank was comparable to some other local banks that have been hit with regulatory orders.

“Over the last six to nine months we’ve been reducing some of the problem loans,” he said. “But as the economy continues to get worse, that’s having an impact. We seem to being taking two steps forward and one step back.”

• • • JPMorgan Chase Bank, which is now calling itself Chase, got around to renaming all of its former Washington Mutual branches last month. To accomplish the job, Chase said it spent $375 million in California alone to cover not just new signs, but refurbishing some of the branches.

Chase Rebrands Its WaMu Branches:

Chase spokesman Gary Kishner said all WaMu branches built after 2001 were designed with a more open feel, using tables rather than the more traditional teller walls used by most banks, including Chase. It also installed high-efficiency heating and air conditioning, low-irrigation plant landscaping and solar panels at many branches.

The branch redesign applied to all 708 branches that New York-based Chase acquired in September as part of a quickly arranged sale by the Federal Deposit Insurance Corp. for a measly $1.9 billion after news of WaMu’s deteriorating financial condition caused a massive run on the Seattle-based bank. WaMu, which had $300 billion in assets when it was seized, was the biggest financial failure in the nation’s history. To clean up all of the problem loans it had made, some banking analysts estimate that the federal government will have to spend $20 billion during the next several years.

In San Diego, Chase owns 74 branches with $7 billion in deposits.

• • • BofI Holding, parent of Bank of Internet USA, said it is withdrawing an application to obtain TARP funds because of the changing conditions applied by the government, the rise of negative publicity attached to the funds, and the bank’s well-capitalized position.

Small Change: