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Illinois Lender Plans to Aggressively Unload REO, Other Assets

NOV 9, 2012 9:18am ET
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BankFinancial, Burr Ridge, Ill., is considering an aggressive plan to scrub its balance sheet of troubled assets by the end of the year.

The $1.5-billion-asset company said in a quarterly filing with Securities and Exchange Commission Thursday that its management is evaluating a plan to reduce nonperforming assets through "accelerated dispositions" during the fourth quarter. BankFinancial has not yet presented the plan to its board.

"If approved by the board, the objectives of such a plan would be to achieve a meaningful reduction of nonperforming loans and [other real estate owned] by the end of 2012 such that the future potential impacts to earnings in 2013 and future years from credit-related costs are materially diminished," the filing said.

The company also said that it had tried "accelerated dispositions" with some of repossessed assets, selling $2.4 million of other real estate owned and accepted offers for another $4.3 million. Those agreements accounted for 38.6% of the company's repossessed assets at June 30.

"Our evaluation methodology involves an assessment of the disposition strategy that provides the highest cash proceeds within a defined period of time," the filing said. "During the third quarter of 2012, we changed our disposition strategy on certain income-producing OREO assets from an ordinary-liquidation pricing model to an aggressive pricing model designed to stimulate market demand."

The company's nonperforming assets fell 16.4% in the third quarter from a year earlier, to $76 million.

Overall, troubled assets continue to drag on the company's profitability. Its third-quarter loss was 174% larger than its loss from a year earlier, at $5.2 million, mostly because of increases in the money spent to manage nonperforming assets and foreclosed properties.

The company's loan-loss provision fell 40% from a year earlier, to $4.45 million, but lower net interest income largely offset the decrease. Net interest income fell 18% from a year earlier, to $13.4 million, as loan balances declined

 

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