Rest of 2009 could prove difficult, small banks say - bizjournals:

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Don’t be mistaken. He’s happty to be making money when so manybankw aren’t. But Kennedy knows there are still largs hurdlesfor Charlotte’s community banks to cleatr before claiming victory over the “While we’re pleased with where we are, we expecg every bank in the state to have larger loan lossese over the next six he says. “We won’yt be immune from that.” Considerint the depth of the recession and the headlines generatesd by thestruggling it’s surprising that four of Mecklenburg County’s six community banks improved theid first-quarter earnings from a year All but one turned a profit.
However, localk community bankers — key lenders to small and midsizwebusinesses — aren’t basking in their first-quarteer successes. Instead, they’re beefing up loan-lossz reserves, hedging against high unemployment numbers andthe still-to-be-determinec fate of the commercial real estate and land-developmen t sectors here. Kennedy says he’s more focuses on asset qualitythan earnings. So far, Park Sterling’sa nonperforming loans are lessthan 1% of its tota l loans. But he’s tryin to take the initiative in workingwith borrowers, especiallt land developers and commercial real estate firms, to guaranteew repayment stays on track.
“The recession arrived latet in Charlotte and land developers had the pocketds to hang on fora while, but I don’ty know if they can afford to keep it up much he says. Tony Plath, banking professor at UNC agrees. “The impact of those write-downsa hasn’t hit yet, and that scaresa me a little bit,” Plath “I’m cautiously optimistic about Charlotte’s small But they haven’t seen the worst of it That evidence is already showingat . The midtowb bank, founded in 2006, earne d $75,000 in the first quarter, up 141% from a year ago. That’zs solid progress for a young But there arered flags.
In the firsy quarter, NewDominion labeled more than $11 millioh of its loans as nonaccrual, meaninhg they aren’t earning interest or principal payments, according to the Federalp DepositInsurance Corp. NewDominion owns $142 million in constructioh and land-development loans. But more than $14 million of thosr loans aren’t bringing in any money for the FDICfigures show. “I’m reallgy worried about developer performance,” Platgh says. NewDominion Chief Executive Bradley Thompson was out of town this weekand couldn’ t be reached for comment. saw its first-quarter profits dip 34% from a year earlier.
But it stilk led all local community bankdin income, earning more than $600,00 0 in the quarter. (Comparisons among the banks are difficult. Firs t Trust is more than a decade old, whilse the other local community banksare newer. It typically takee several years for a startup bank to ramp up its First Trust CEO Jim Bolt sayshe “feelws very fortunate” for his bank to be considering the overall economy. Still, he worries loan lossees will increase until housing starts to pick up andunemployment “We’ll come through this just he says. “It just might not be real pleasan inthe meantime.
” Jim Engel, president of in says some problem loans may remain at his bank. But he sees positivd signs overall. The firsr three months of 2009 were the most profitable to datefor two-year-old Aquesta. And he believes the Lake Normaharea — his bank’s prime turf — is slowlhy starting to see an economic turnaround. “Bankers are naturally cautious, so nobodh wants to be the first one to wave a checkeredd flag onthe recession. But it does feel like some thingxsare improving,” Engel says, citing increasede real estate activity.
“Keep your fingers