Bancorp R.I. bolsters reserves against bad assets
9:59 AM Thu, Mar 19, 2009 | Permalink
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Bancorp Rhode Island (BARI:NASDAQ) added to its reserve funds in 2008 as it covered potential losses in its growing commercial loan and lease business, according to a federal regulatory filing. The parent company of 16-branch Bank Rhode Island, BARI say its commercial loan and lease business grow 14.8 percent in 2007, from $573.7 million to $658.4 million in 2008. As these business lines rose, the bank also so saw its nonperforming loans and leases spike 251.2 percent, from $4.1 million in 2007 to $14.4 million in 2008. To cushion against those potential losses, the bank added $4.5 million to its reserve fund, which exceeded its charge-offs by $2 million.
A non-performing loan is a loan that is in default or close to being in default. Loans go into default when the borrower fails to make the loan payments on time, fails to maintain adequate insurance or violates some other provision of the agreement. Depending on contract terms, many loans become non-performing after being in default for 3 months. A charge-off is the term that creditors use when they determine that they are not able to collect a debt that is owed to them and they write that debt off as a loss against their income taxes. Recently, BARI recently an accord with a pair of dissident investors in a nearly three-year fight over operation of the Providence-based financial institution. As part of the pact with PL Capital LLC, the bank's management has agreed to cut the size of its board of directors from 15 to 12 people over three years and to move to a majority-vote system for board elections. In exchange, PL Capital partners Richard Lashley and John Palmer agreed to halt efforts to oust certain company executives and to change the way the bank operates. In addition, they have agreed to support the bank's director nominees. 
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