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Tuesday, Mar 19, 2024
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Auto Lender Balboa Thrift & Loan Contests Bank Examiners’ Order

Balboa Thrift & Loan isn’t looking backwards, only forwards after receiving a regulatory order that found the $200 million lender was “engaged in unsafe and unsound practices.”

“We’re on our way to moving on,” says Ted Monzingo, BT&L’s chief executive officer, who has held the top job at the auto lender since 1990, the longest track record among local financial services CEOs.

The thrift and loan (which resembles a bank except for not offering checking accounts) is contesting the order from the Federal Deposit Insurance Corp., which was received at the end of last year. Monzingo said it will give the thrift’s side of the story in an administrative hearing set for next month.

The order was the result of an annual examination by the FDIC that was completed in March 2009, but based on the thrift’s 2008 results.

Among some of the policies regulators criticized were the absence of formal guidelines for restructuring loans; noncompliance with generally accepted accounting practices regarding restructured loans; and not identifying its losses in a timely manner, according to the order issued Dec. 15.

The lender reported net profits of $361,000 in 2009, and $179,000 in 2008. In 2007, its net profit was $909,000.

Looking at the first quarter results, BT&L appears to be on a roll, with net income of $216,000, compared to net income of $128,000 in the first quarter of 2009.

Total assets shrunk by about $10 million to $195 million, after the sale of its Bakersfield branch last year. In addition to its Chula Vista headquarters, it has branches in Claremont, Fresno and La Quinta.

Loans also declined by about $15 million to $176 million.

It also reduced the amount of its problem loans to about $1.7 million from $2.6 million in the prior year’s first quarter. Together with about $726,000 in foreclosed real estate, the problem assets made up 0.92 percent of its total assets, below the norm.

The lender’s capital is also far above average with total risk-based capital at 12 percent, up from 10.47 percent in the prior year’s first quarter.

Monzingo says since the order was filed, BT&L had another exam, which went much better than the last one. He thinks the main problem involving the order is bank examiners applied the same criteria in evaluating real estate credits to BT&L’s portfolio, which is about 75 percent in auto loans.

Besides the loans being much smaller than those on real estate — the average is about $14,000 — things happen much faster when a borrower stops paying on a car, he said.

Instead of dealing with a problem involving a real estate loan over two to three years, it’s far quicker to repossess a vehicle, he said.

Monzingo says the lender has always worked with borrowers who get into trouble, and has restructured loans as needed. In the first quarter, BT&L reported $934,000 in restructured loans, compared to $199,000 in the first quarter of 2009.

“We’ve been doing auto loan rewrites for years, and there’s never been a problem before this exam,” he said.

BT&L has a long history of being focused on auto paper as a result of its board deciding the loans were a much safer risk than those on real estate, Monzingo said.

The great bulk of the loans the lender makes are through new auto dealers, with some 60 percent of the loans for used cars. All loans charge fixed interest rates.

About the only change caused by the lousy economy is reducing the advances on car values from about 130 percent to a maximum 110 percent, but that’s only for the best credit risks, Monzingo says.

• • •

SBA Lending Keeps Rising: Loans backed by the Small Business Administration in the San Diego district continued to grow this year, reflecting a much improved lending environment.

For the eight months of the 2010 fiscal year that ended May 31, the local district, which includes Imperial County, counted 435 SBA loans for a dollar value of $184.7 million, up 88 percent in dollars from the like period of last fiscal year.

Those results compare to 298 loans with a dollar value of $98.1 million for the same eight months of FY 2009. The report combines both types of SBA loans, the 7(a) for working capital and the 504 program for property.

The top SBA lenders through May were Wells Fargo, 54 loans; CDC Small Business Finance, 51 loans; and JPMorgan Chase & Co., 40 loans.

• • •

Mission Oaks Still Under Orders: Mission Oaks National Bank, based in Temecula and with an office in Fallbrook, received a second consent order from its main regulator, the Office of the Comptroller of the Currency, following up on an order from the OCC in 2008.

Last month, it also signed a written agreement with the Federal Reserve Bank of San Francisco repeating commitments that are similar to the OCC order, to improve a number of its operations, including increasing its capital base.

The latest OCC order requires the bank to maintain a minimum Tier 1 capital of 9 percent of adjusted assets, and to maintain total risk-based capital of at least 12 percent. Banks with 10 percent in the latter measurement are considered well-capitalized.

As of March 31, Mission Oaks reported holding about $23 million in problem assets or 12.35 percent of its $186 million in total assets, compared to 6.73 percent in problem assets in March 2009. The bank also reported losing $512,000 for the first quarter of this year, compared to losing $2.4 million for the like quarter of 2009.

Send any news about locally based financial institutions to Mike Allen via email at mallen@sdbj.com. He can be reached at 858-277-6359.

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