Loan problems plague The Bank Holdings

The Bank Holdings, the Reno-based parent of Nevada Security Bank, reported last week that it lost $22 million in the second quarter.

The loss included $7.66 million that the company set aside to cover additional possible loan losses, a $7.5 million income tax expense stemming from the company's days as a startup earlier this decade and a $2.6 million write-off of goodwill associated with its 2006 acquisitions of Northern Nevada Bank and two real-estate exchange companies.

The Bank Holdings is making progress on meeting a regulatory order to raise more capital to help cushion the effects of loan losses, said Hal Giomi, chairman of The Bank Holdings.

The fresh capital was demanded by the Federal Deposit Insurance Corp. and the state Financial Institutions Division earlier this summer.

The company also continues to shrink the number of loans on its books. On June 30, its loan portfolio totaled $396 million compared with $432 million at the start of the year.

Most of the decrease has come as the bank reduced its lending for construction by 41 percent.

But Nevada Security continues to struggle with declining real estate values in its markets in northern Nevada and northern California.

"The geographic diversity of our loan portfolio ... once considered to be a 'best practice' has not protected us from the systemic risks of a global recession," the bank said in a filing with the Securities and Exchange Commission last week.

Borrowers weren't making timely interest payments on $50 million in loans on Nevada Security's books on June 30. This compares with $32 million in non-performing loans three months earlier.

The bank holds 14 properties valued at $9.8 million that it has taken back through foreclosure. At the start of the year, it held three foreclosed properties valued at $2.1 million.

"We have every expectation that the weak economic environment will not substantially improve during the rest of 2009, and the malaise is likely to extend into 2010," the company said in its SEC filing.

The company said in the filing that the Federal Reserve Bank of San Francisco has designated it to be in a "troubled condition" and will take further action. While details of the Federal Reserve's plans aren't known, Giomi said the bank expects they will be similar to those required earlier by the FDIC and the state banking agency.

The holding company's publicly traded stock, which rose above $15 a share in 2007, was trading at 56 cents last week.