Is Your California Bank Financially Safe?

The second quarter could easily see another sharp rise in nonperformers for Security Pacific, since loans past due 30-89 days (but still considered performing) comprised another 5.81% of total assets as of March 31.

We discussed Downey S&LA (a unit of Downey Financial Corp.(DSL Quote)) back on April 25.

While the above table shows nonperforming assets of 11.18% for Downey, that figure includes performing loans that were modified as part of Downey's customer retention program. While still performing when modified, these loans were required to be reported as nonperforming. If we net these loans out, the actual nonperforming assets ratio was 7.41% as of March 31, with loan loss reserves covering 69.7% of nonperforming loans.

All things considered, Downey was still pretty strongly capitalized as of March 31, with a leverage ratio of 8.43% and a risk-based capital ratio of 15.28%.

The problem with Downey is that its interim reports are showing a continuing rapid slide in loan quality. According to the holding company's interim report, adjusted nonperforming assets (again netting out the performing modified mortgages) had increased to 9.77% of total assets as of May 31. We'll have to wait and see how the thrift's capital levels look when the second-quarter earnings results are released.

PFF Bank & Trust of Pomona (held by PFF Bancorp(PFB Quote)) slipped to adequately capitalized when it took a $97 million net loss for the first quarter. This was the thrift's third consecutive quarterly loss. Just in the first quarter, nonperforming assets doubled, to 10.95% of total assets as of March 31.