The $25,000 profit that The Bank Holdings squeaked out during the second quarter reflected aggressive cost-cutting by the Reno-based parent of Nevada Security Bank.
The company said it cut its overhead expenses by $51,000 from the second quarter a year earlier, and its overhead for the first six months of this year ran $491,000 under last year's level.
Among the cuts: A reduction in employment by 14 most of it coming through attrition and the shuttering of a Montana operation that specialized in handling so-called "1031 exchanges" of real estate.
The Bank Holdings wrote off the $120,000 it paid for the Montana operation in early 2006, although it continues to operate a similar 1031-exchange business in northern California.
Even with the cost cutting, the earnings of $25,000 for the quarter were down nearly 97 percent from the $804,000 the company earned a year ago, and its net income of $534,000 for the first half of this year was down more than 57 percent from the first six months of 2007.
On one hand, the interest that The Bank Holdings received from outstanding loans fell to $9.4 million in this year's second quarter from $11.2 million a year earlier. As the economy slowed and bankers tightened their standards, the company booked fewer new loans, and its average loan portfolio of $461 million was down 2.7 percent from a year ago.
At the same time, Nevada Security Bank and Silverado Bank the company's operation in northern California were charging off more loans that had gone bad.
In the second quarter, the banks set aside another $1.1 million to cover potential loan losses. The company now has a $7.2 million reserve to cover bad debts a figure equal to 1.57 percent of its total loans.
The Bank Holdings said about $9 million of its loans were more than 90 days delinquent at the end of the quarter and it wrote off $897,000 in loans during the three-month period.
Without the provision for bad loans, the company's second-quarter earnings would have outpaced last year's figures, said Hal Giomi, chairman and chief executive officer of The Bank Holdings.
He said the company expects the region's economic downturn may continue into 2009. But he said it's unlikely the company will be required to set aside much more money for potential loan losses because it's booking fewer new and renewed loans these days.
The company's stock was trading on Nasdaq at $5.18 a share last week. In early 2007, the shares flirted with the $20 level.
