Third-quarter earnings statements filed by Savannah’s community bankers indicate the volume of troubled loans finally is decreasing.
Delinquent loans, or those at least 90 days past due, fell 21 percent between Sept. 30, 2011, and the same date this year for the nine Southeast Georgia-based community banks that serve Savannah.
The area’s three largest community banks in terms of deposit share — Coastal Bank, First Chatham Bank and Savannah Bank — saw delinquencies fall in the 30 percent range. Coastal Bank’s improvement was particularly impressive. The bank claimed $13 million in non-performing loans at the end of the third quarter down from a 2010 peak of $33.7 million.
“The trend is the first sign that we might actually be coming out of a recession,” said Brian Foster, president and CEO of First Chatham Bank. “The economists may have said we were out of it, but it never felt like it. A borrower got in trouble, there were no buyers out there.”
The resulting stabilization of property values has the community bankers seeing less red on their balance sheets. Stable values positively impact bank reserves, repossession sales and expenses, as well as delinquencies. Quarterly contributions to reserves to cover potential losses — the biggest drags on profitability — are down almost 300 percent from 2010.
Four of the nine banks showed a profit through the first nine months of 2012, and one more, Savannah Bank, would be profitable if not for accounting charges tied to its pending merger with South Carolina Bank & Trust.
Another bank with a year-to-date loss, First Chatham Bank, posted a profit in the third quarter and anticipates another in the current quarter. First Chatham could potentially show a profit for the year after losing more than $20 million in 2010 and 2011.
The signs of recovery are not “headline news,” according to Georgia Southern University banking analyst Ed Sibbald, but do show “progress.”
“We’re seeing gradual improvement in loan portfolio quality,” said Sibbald, director of GSU’s Excellence in Banking and Financial Services program. “After the roughest three years banks have seen in a half-century, the progress is encouraging.”
Fewer problem loans will arrest community bank decline, but the growth driver — new loans — remain rare.
“We felt like early in the third quarter we saw a momentum swing, but it chilled in the fall because of the combination of election uncertainty, fiscal uncertainty and the normal holiday distractions,” The Coastal Bank’s Jim LaHaise said.