FDIC:Balboa Thrift Operating In Unsafe Manne

Balboa Thrift and Loan, a $200 million asset lender based in Chula Vista, has been put on notice by the Federal Deposit Insurance Corp. that it has been operating in an unsafe and unsound manner with policies that are detrimental to the thrift.

Thrift and loans are similar to industrial banks and differ from most commercial banks in one key area: They do not offer checking accounts to their customers.

Ted Monzingo, Balboa’s president and CEO since 1990, said he and his board “definitely don’t agree with them (FDIC), so we’re disputing the charges and giving notice that we want a formal hearing.”

The actual date for the hearing before an administrative law judge hasn’t been set, but will likely take place in August, Monzingo said.

He said Balboa has been operating in the same manner as in past years, hasn’t changed its policies, and received passing bank examinations in 2006 and 2007.

“They (the past exams) were always good, everything was right, except this last one wasn’t, even though we haven’t changed anything,” Monzingo said.

Charges Leveled

Among the charges leveled in the FDIC order that was filed Dec. 15 and announced in late January are that Balboa doesn’t provide guidelines for restructuring loans, doesn’t comply in its reporting of restructured loans with generally accepted accounting practices, is deficient in its policies covering loan concentrations, its reserve allowances, capital maintenance, and subprime loans, and has resisted adopting regulators’ recommendations from the current and past examinations.

The charges are the result of a bank exam based on the thrift’s 2008 results and completed in March 2009.

Founded in 1980, Balboa Thrift and Loan has reported profits in recent years, and has been well-capitalized. According to its most recent call report filed with the FDIC, it reported net income of $361,000 in 2009, compared with $179,000 for 2008 and $909,000 for 2007.

Balboa also has plenty of capital or core reserves, another key metric used to measure a financial institution’s health.

Solid Numbers

As of the end of last year, its Tier 1 leverage ratio was 9.46 percent, and total risk-based capital was 12 percent. Both ratios are regarded as well-capitalized.

Balboa’s reported nonperforming assets at the end of December were $2.5 million, or 1.2 percent of total assets of $205 million, compared with holding 1.59 percent in nonperforming assets as of December 2008. Those are ratios of problem assets most lenders would love to have, given how the recession has wreaked havoc on most portfolios.

Balboa Thrift and Loan has concentrated on making mainly car loans, and has about $155 million, or 86 percent of its portfolio, in car loans, according to its latest call report.