Bank of Queensland may be counting the enforceability of the security it holds from dozens of owners of franchised branches in New South Wales to recover their loans to their former, or failing, business partners.The bank's financial statements for the full year to August 2008, published yesterday, and the supporting management commentary do not provide much insight to the escalating asset quality problem from the poor returns from the bank's expansion into the New South Wales market in recent years.Impaired assets more than trebled over 12 months to $31.6 million and still doubled over six months, which allows for the inclusion of Home Building Society.Loans 90 days past due increased to $157 million at August 2008, or 0.65 per cent of assets, up from $88 million or 0.52 per cent of assets a year earlier.BOQ reported growth of 25 per cent in retail deposits over the year and loan growth of 23 per cent, which is close to twice the financial system (and which leaves out the takeover of BOQ).So there are many aspects of the BOQ business model, and distribution network, that are working well for the bank.Bank management declined to provide a regional breakdown of the growth in deposits and loans yesterday, a question asked in order to get better insight into issues afflicting the network of more than 50 owner-managed branches in New South Wales, or about a fifth of the bank's network.BOQ managing director David Liddy attributed the issues in its New South Wales network to the economic downturn and "poor choices" in the selection owner managers. Owner managers of franchises in a precarious financial position put the poor performance down to the weak BOQ brand in the Sydney market, a lack of marketing, and poor planning and support from BOQ.Branches continue to close in and around Sydney, with the owner of the Bankstown franchise the latest to hand in the keys.Plenty of other branch owners are receiving financial help from BOQ, including the waiver of loans or the reduction of loans taken out to fund their investment in the branch.Current and former branch owners who have sued BOQ on various grounds, including breach of contract, find the bank won't negotiate over their loans, which in turn may be a prominent proportion of the delinquent BOQ loans reported above.