NORTHWEST ARKANSAS — Troubled real estate loans pushed Signature Bank to a $3.46 million first quarter loss resulting in a 10 percent staff reduction.
The bank confirmed 13 workers across its six branches in Northwest Arkansas got pink slips Friday.
The company is trimming its expenses amid higher real estate loan delinquencies, which are up 33 percent in the past year to $15.47 million as of March 31.
President Gary Head said the layoffs were part of a larger effort the bank is undergoing to shrink its posture.
The bank reported assets of $665 million at the end of March, down from $687 million a year ago, according to reports on file with the Federal Deposit Insurance Corporation.
“These were gut wrenching decisions that had to be made, given we were staffed to grow at 10 to 15 percent annually,” he said.
The bank trimmed its staff from 162 to 145 through attrition and a hiring freeze during the past year, according to federal filings.
Head said the bank has 132 employees following Friday’s layoff. He said the employees got severance pay and a letter of reference.
Northwest Arkansas lost 200 jobs in the financial sector from March 2009 to March 2010, according to the Bureau of Labor Statistics.
“The local financial employment sector peaked in June 2007 with 8,900 people as several banks expanded in the area. As of March, there were 7,700 people working in this sector which will likely incur further consolidation,” said Kathy Deck, director with the Center for Business and Economic Research at the University of Arkansas.
She said the shakeout in the financial sector is not over. Banks likely will have to deal with some kind of new regulation as well as figure out how to exist in a very different world when the economy fully recovers.
Signature Bank’s $3.46 million first quarter loss was attributed to the $7.4 million it set aside in the period toward loan loss reserves. Provisions for loss reserves do not flow through to bottom line profit and if large enough result in a net loss.
“The lion’s share of the $7.4 million reserves relate to loans made to three large developers who folded in the quarter. We had one commercial building that appraised for $5.2 million five years ago, $3.5 million two years ago and $1.6 million last month when we had to take the loss,” Head said.
The bank declined to say how much of its losses, if any, related to loans made to John David Lindsey, who is now in Chapter 7 bankruptcy.
Signature Bank had more than $9.2 million in real estate-related loans to Lindsey, according to Lindsey’s March bankruptcy filing,
Through its attorney Charles Trantham, Signature Bank has petitioned the bankruptcy court to reclaim the real estate collateral backing loans made to Lindsey. A hearing in the case is set for May 12.