Virginia National Bankshares in Charlottesville, Va., will increase the loan-loss allowance for its student loan portfolio after an outside insurance carrier was shut down.
The $625 million-asset Virginia National said in a regulatory filing Thursday that ReliaMax Surety, a South Dakota insurer that issued surety bonds tied to purchased student loans, is insolvent and was placed into liquidation last month.
All claims against ReliaMax as of July 27 must be filed by the end of this year with payouts expected in 2019. Virginia National said in the filing that it plans to “aggressively pursue” its claims against ReliaMax in the liquidation proceedings.
The company said second-quarter charge-offs for past-due student loans should total about $320,000 and that it will likely add $700,000 to $950,000 to its allowance to account for expected losses.
Virginia National disclosed that purchased student loans totaled $59 million, or 11% of all of its loans, on June 30.
The quarterly loan yield on the student loan book, which largely consists of floating-rate loans, rose from 4.99% in the third quarter of 2015 to more than 6.6% at June 30. Virginia National said it has earned more than $7 million in interest income from the loans since buying the first of four portfolios in mid-2015, including roughly $2 million in the first half of this year.