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Posted August 5, 2009 | Copyright © The Northern Virginia Daily
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Banks saddled with bad loans
By James Heffernan -- email@example.com
Soured real estate loans continue to weigh on local banks' balance sheets.
Summit Financial Group, the holding company for Winchester-based Summit Community Bank, reported a loss of $3.5 million, or 46 cents a share, for the April-June quarter after writing off $13.8 million in bad loans, mostly in construction and development.
"We continue to work through our portfolio of problem assets as thoroughly and efficiently as we possibly can. It is our job one," Summit President and CEO H. Charles Maddy III said in a statement.
As of June 30, Summit's nonperforming loans -- those considered delinquent and no longer producing income -- totaled $61.7 million, or 5.22 percent of its total loans, compared with $79.6 million, or 6.58 percent, for the first quarter. Maddy said the improvement was the result of a combination of charge-offs and transfer of foreclosed properties.
"We worked out a plan for each major project and acted decisively to either charge it off or take control of the workout process," he said.
Nearly $30 million of Summit's construction and development loans remain classified as nonperforming.
The company increased its provision for loan losses for the quarter to $5.5 million from $1.75 million for the second quarter in 2008.
Maddy said he believes Summit's level of nonperforming assets has peaked, and the company anticipates a return to profitability in the third quarter.
"We are beginning to see some modest improvement in housing and other economic trends within our markets, particularly in Virginia," he said, adding that Summit's core banking business remains healthy and stable.
Meanwhile, Eagle Financial Services, the holding company for Bank of Clarke County, reported net income for the second quarter of $904,000, down slightly from $955,000 for the first three months of the year.
Eagle wrote off $1.7 million in problem loans during the second quarter and foreclosed upon real estate assets valued at $2.2 million. It also sold three pieces of real estate recorded at $677,000.
The company made the decision to increase its allowance for loan losses for the second quarter to $1.1 million based on its level of problem loans, continued uncertainty in the economy and the ongoing credit crisis.
"These are difficult times for Eagle Financial Services Inc., the industry and our economy in general, but there are some signs of recovery, particularly in larger financial institutions and the housing market," President and CEO John R. Milleson said in a statement.
"I believe 2009 will continue to present challenges," he said, "but the Company is determined to be even stronger after the recession than it had been before."
Strasburg-based First Bank's corporate parent, First National Corp., saw its second-quarter earnings fall to $237,000, in part due to declines in the value of certain foreclosed real estate and an increase in its own provision for loan losses.
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