2Q was uneventful. The loan quality shown continued improvement. NPL was in low 3% and 30-89d PD went way down. At the mean time ALLL is over 2% of loans, almost as if over reserved.
Earning side is still weak for the second quarter in a row. While interest margin is way above peers--by as much as 1%--non-interest expense are still very high*. Pre-tax, pre-provision operating earning was at 1.4% range. Some improvement is likely. I am hopeful.
Beside provision for loan losses, net earning was penalized by security investment loss which may be one time in nature.
I am happy.
* It was historically high, the cost associated with the acquisition of Service First and new Mercer branch probably masked the improvement.
The improvement in non-accrual loans appears to be a mathematical improvement thanks to a decrease in average loans and shifting to other accounts. Take a closer look at the numbers and you see a greater $ amount of loans classified as non-accrual than were removed as non-accrual. Investment protfolio is government securities, including munis. Loss likely from munis and the way California is going, it may not be a one-time deal, and the non-accrual loans will probably continue. Sorry for being the pessimist.
I failed to see the loan flow. Maybe I did not look in the right place?
The investment portfolio is something new to me. Is it true that tax wise it can only benefit from California issues? If so, I am more worried. As a matter of general concern, State bonds & munis may be into a prolonged credit slump.
I am also impatient to the lack of improvement on overhead, especially that it did not generate much non-interest income. Deposit gathering has been strong and cost low, but little flew to the bottom line. Gggg
The aggi business base in the valley adds another element of uncertainty. It's harder to see what's keeping it from better results.