Summit State Bank in Santa Rosa, Calif., reported a net loss in the second quarter as it tried to address higher-risk credits.
The $960 million-asset bank lost $1.3 million, compared to a $2.4 million gain a year earlier. The recent quarter included a $5.9 million loan-loss provision.
The bank said it recognized “significant chargeoffs” and recorded additional provisions after a comprehensive review of certain higher-risk credits. The result was a roughly 44% reduction in nonperforming loans from the prior quarter.
“Our second quarter results reflect deliberate actions to address identified credit risks within the loan portfolio,” Brian Reed, the bank’s president and CEO, said in a press release. “Throughout the quarter, the board and management evaluated a range of alternatives for resolving certain problem credits and took decisive actions, including loan sales, to reduce risk and strengthen the balance sheet.”
During the second quarter, the bank sold four notes on one relationship totaling $9 million and had a $5.1 million partial chargeoff on one relationship. Nonperforming assets at June 30 include $2.3 million for an OREO property.
There was $8.7 million in net chargeoffs in the second quarter.
“Credit quality metrics … are concentrated in several large relationships, rather than broad-based deterioration across the portfolio,” Reed said. “Of the nonperforming portfolio, 88% are current based on contractual payment status, although these loans remained classified as nonperforming based on management’s credit assessment as of quarter-end.”