The leadership of First Chatham Bank hailed the bank’s “continued progress and improvement” in a letter to shareholders sent Wednesday.
The Savannah-based community bank reported its first quarterly profit in more than two years in the quarter that ended Sept. 30, according to a report filed with the Federal Deposit Insurance Corporation. The bank remains approximately $2.5 million in the red for the year although declining delinquencies and pending sales of repossessed properties should whittle that loss down further during the current quarter.
First Chatham’s pending sale of its small business lending arm, Quadrant Financial, will further bolster its financial situation, the letter said.
“This deal creates more capital for the bank, increases shareholder value and allows us to focus on our coastal markets,” reads the letter signed by First Chatham President and CEO Brian Foster as well as the bank’s chairman, Benny Curl, and the bank holding company’s chairman, Steve Green.
First Chatham, like most community banks in the area, suffered significant losses during the recession and the slow economic recovery. Banking regulators issued First Chatham a consent order in August 2010, demanding the bank improve its performance and placing restrictions on its loan practices.
The majority of First Chatham’s loans are tied to real estate, and falling property values and delinquencies resulted in more than $11 million in losses in 2010 and 2011. The bank began to see progress as property values stabilized earlier this year, and First Chatham has liquidated more than $6 million in property this year with another $7 million under contract.
“Many of these properties are being sold with only small losses and even some with gains,” First Chatham’s shareholder letter read. “That means we may have already taken most of the large markdowns on collateral values, which have been the biggest contributor to our past losses.”
First Chatham is also seeing gains in its deposit base and other non-loan activity.
The improvements boosted First Chatham’s capital ratios, which are closely watched by regulators and had been in a gradual slide since the onset of the economic downturn. The bank remains well below “well-capitalized” designations set by regulators, but the third quarter ratios do not include the capital First Chatham will reap from the Quadrant sale, which won’t close until Dec. 31 at the earliest.