One Bank Pick Stumbles, the Other Soars

You win some, you lose some.

Nearly two months ago, TheStreet.com Ratings singled out First Community BancorpFCBP, of San Diego and First Niagara Financial GroupFNFG, of Lockport, N.Y., as two potentially attractive investment candidates based on price-to-book multiples, as well as earnings, loan quality and reserve coverage.

Since then, First Niagra has soared, while First Community has slumped:

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First Community Bancorp reported a surprising first-quarter loss on April 17, with shares sliding 6% on the day, to close at $24.42. The spanking has continued from there, with shares closing at $22.72 Friday. The total return since we discussed the company on March 4 is a negative 16.39%.

In our earlier analysis, both holding companies easily met all of our criteria, maintaining healthy profiles through the ongoing mortgage crisis. Both were selling at price-to-book ratios below 1, with the book values appearing to be well supported by strong asset quality, good earnings performance -- especially for First Community -- and very strong reserve coverage.

First Niagara, on the other hand, reported decent first-quarter results Thursday, with net income of $18.8 million, down from $27.8 million last quarter, but slightly up from the same period a year ago. Shares rose 6% on the day to close at $13.90. First Niagara's total return since March 4 was a lovely 19.21%.

In comparison, the S&P 400 Financial Index returned 8.36% for the same period.

What Happened to First Community?

After several years of good earnings results, First Community announced a net loss of $272 million, springing mainly from a $275 million writeoff of goodwill. Like most bank holding companies that have acquired rivals, First Community carries goodwill as an intangible asset on its balance sheet, to represent the premium over book value it paid for the 19 banks it has acquired over the years.