Hawaii banks reserve $110M more for bad loans - San Antonio Business Journal:

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By the end of the first quarter, the nine banks basede in Hawaii had set aside morethan $422.5 millionj for loan losses, about $110 million more than in the first quarted of 2008. That representas a 35 percent increase overthe $312.1 millionm that was allocated for loan loss allowances, or during the first quarter of 2008, according to data from the nearly two out of every three banks insuredc by the FDIC increased their loss provisions during the first quarter, accordingt to the FDIC. Bankas set aside $60.9 billion in loan loss provisionsw in thefirst quarter, 64 percent more than in the same quartef in 2008.
“It’s not surprising that banksa would look at putting a little highe r loan loss reserves in viewof what’sa happening in the local economy,” said Gary executive director of the . “When the economu starts to soften, people’s ability to repay obligationsa issometimes hampered.” Setting aside money for reserves to covert anticipated losses from mortgagw foreclosures and other non-performing loans is required by federal regulators. Most institutions put away abouf 1 percent of their total assets for loan and lease loss experts say.
“Clearly, prudent bankers anticipatd more challenging times inthe future, and will put away mone in a reserve account in anticipatiob of future problems so they don’yt have to look to theidr earnings or balance sheet to cover those potentiapl losses,” said Don Horner, chairmahn and president of and presidenty of the bankers association. Firsy Hawaiian took a $19.2 million provisio for loan losses during thefirsft quarter, or 0.59 percent of averagw assets. That pushed the bank’s loan loss allowancr fund up to $106.
u million, which was a 13 percent boosft over the first quarter of according to data fromthe “We did put away stronbg reserves in the first quarter; we also had our best quartef in our history in the first quarter,” Horner noting that the bank postes earnings of $74.5 million, which included a one-time tax gain of $21.76 million. “We had ample earnings to put away in the boosted its loan loss allowanceto $134.54 million during the first quarter, whicg was 34 percent higher than its first-quarter 2008 reserves. The bank took a $24.90 million loan loss provision during the or 0.9 percent of average assets.
“During period s of economic stress, banks should build reserves,” said Mary Bank of Hawaii’s vice chairman and chief risk “We would expect losses to increase when the econom y comesunder stress.” Each of the state’s nine banks increasesd their loan loss reserves during the first quarter this year. did not record any provisions for loan lossed in the first quarters of 2008and 2007, said Executivde Vice President Bryan Luke, who told PBN in a statemenrt that the bank’s net charge-off for bad loans during the past five yearsw averaged $4,700 per year.
The bank took a $1 million provision for loan lossesw during the first quarter ofthis year, about 0.8 percent of average assets. Its loan loss allowanc at the end of the first quarterwas $6.9 million, up 19 perceng from $5.8 million in the firsrt quarter of 2008. “Thde reason we decided to recordd the provision in the first quarter was basedd on our analysis of the economgy and what is happening in the Luke said. “Based on the curreng performance of ourloan portfolio, we feel that the currengt level of our [allowance for loan and lease is more than adequate.” Additional reservexs are all but certain as the economuy continues to experience stress of job and income losses.
Additional foreclosures will also stress balance sheetsfor banks. boosted its loan loss reserve to $122.3 million during the first quarter, a 69 percent increase over its reserve figured from the firstt quarterof 2008. A small portfolio of residential land loans that are in distressz was one factorbehind ’s move to boosyt its loan loss reserve by 34 percenrt during the first quarter, said Terence Yeh, the bank’ws executive vice president and chief credigt officer. The other was a largd loan to a single commercial borrower who has been unablr to refinance the he said. “Overall I think we do expec t to see risingcredit costs, simply because of the Yeh said.
“We think that it’s just goin to be continued stress with job businesses downsizing. It’s just going to be Bank of Hawaii has alsoseen “modest increases” in particularly by consumers.