Federal banking regulators order MBT to boost loan-loss reserves


MONROE — MBT Financial Corp. adjusted its 2012 earnings downward this week after increasing its allowance for loan and lease losses.

The parent company of Monroe Bank & Trust said it had reassessed guidance from federal banking regulators and decided to increase its allowance for loan and lease losses as of Dec. 31 by $500,000 to $17.3 million.

That decreased the company’s announced profit by $500,000 to $8.48 million. On a per-share basis, profit slipped from 52 cents to 49 cents per share. The revision also cut the company’s fourth-quarter profit to $5.62 million, or 32 cents per share.

H. Douglas Chaffin, MBT’s president and chief executive, said the institution has $38.5 million of loans with restructured payment terms or interest rates considered troubled debt restructurings.

“Even though payments on these loans are current and are performing according to the terms of the restructure, they are classified technically as ‘non-performing’ for reporting purposes,” Mr. Chaffin said in a statement. “The company recorded the additional provision expense as a result of recently issued guidance from the federal bank regulatory agencies recommending additional reserves be taken with respect to certain performing [troubled debt restructurings].”

Mr. Chaffin said the bank believes there is “some conflict between this new regulatory guidance and the traditional accounting treatment in calculating reserves for loans of this type,” but recalculated its allowance for loan and lease losses for the fourth quarter to follow the recommendation.

The allowance aims to be a reserve to absorb losses from loans and leases that a financial institution views as unlikely to be collected.