Life only has become harder for local banks that took federal funding.
They’re preoccupied with rising bad loans or say they’ve had trouble finding good borrowers to lend to—defeating the government’s intended purpose of spurring lending.
Since December, four homegrown business banks here have taken $13.5 million in federal funding under the Troubled Asset Relief Program.
Some of the banks are young and unprofitable, making it hard if not impossible for them to pay dividends to the government under the terms of the borrowed money.
Some industry watchers predict precarious situations for the federally funded banks here, though bankers said they remain positive.
Four-year-old Saigon National Bank in Westminster, which took $1.5 million in federal money in December, said it is “close” to becoming profitable but might not get there until next year.
For the first quarter the latest available for Saigon National—the bank posted a loss of $1.8 million, up from a loss of $300,000 a year earlier.
The bank hasn’t paid any dividends to the government.
Problems with a couple “sizable” business loans have set back Saigon National, according to Roy Painter, chief financial officer.
Otherwise, the bank is doing fine, he said.
“We’ve had our share of issues, but we expect to be profitable next year,” Painter said.
As of June 30, 7% of Saigon National’s $52 million in loans weren’t being paid on, according to figures from Atlanta-based bank tracker Fig Partners LLC.
At the end of the first quarter, 3.7% of Saigon National’s more than $50 million in loans were reported as bad.
New borrowers who used to go to larger banks should help Saigon National reach a goal doing $1 million worth of loans a year, according to Painter.
Finding borrowers is the problem at Newport Beach-based Commerce National Bank, which took in $5 million in federal money funds in January.
“We can’t find people who want to borrow,” Chief Executive Mark Simmons said. “We have a ton of money to loan.”
Commerce National hasn’t paid any government dividends and hopes to soon repay its federal money, Simmons said.
Being associated with federal funding has hurt Commerce National’s image, he said. It doesn’t need the money, according to Simmons.
“This is a strong, solid bank,” he said. “We want to get away from the stigma of being ‘troubled’ like people think the program was for.”
In June, Commerce National’s shareholders approved paying back the federal money.
While Commerce National has been profitable before, it recently posted a small second-quarter loss as it struggles with the slow economy.
The bank had $234 million in assets as of June 30 and a core capital ratio—measuring the amount of cushion it has against loan losses—of 14.3%.
Regulators generally like to see a minimum core capital ratio of 7%, but the higher the better.
About 2% of Commerce National’s $135 million in loans were bad as of June 30, according to Fig Partners.
San Clemente-based Pacific Coast National Bancorp, another federal money recipient, is struggling to become profitable.
The operator of Pacific Coast National Bank got $4 million in federal funding in January and has paid about $18,000 in dividends to the government.
The four-year-old bank with about $140 million in assets posted a loss of more than $2 million in the first quarter.
Nearly 11% of the bank’s $118 million in loans were bad as of June 30, according to Fig Partners.
The bank didn’t return a call for this story.
Garden Grove-based US Metro Bank took about $2.9 million in federal funding in February and has paid nearly $43,000 in dividends to the government.
At the end of June, about 3% of US Metro Bank’s $97 million in loans were bad, according to Fig Partners. At the end of the first quarter, less than 1% of its $92 million in loans were bad.
The bank has a core capital ratio of about 16%.
