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One Bank Pick Stumbles, the Other Soars
04/28/08 - 11:26 AM EDT
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This elevated provision for loan losses was quite surprising, considering that First Community's loan loss reserves covered 316% of nonperformers as of Dec. 31. In March, First Community sold $34.1 million in bad construction loans, charging a $16.2 million loss against its reserves. That is tough medicine, but it allowed the company to avoid trying to work out those loans, which it estimated would have taken several quarters. The earnings release didn't contain complete loan quality information, such as the amount of loans past due 90 days but still accruing. Nonaccrual loans totaled $32 million and loan loss reserves totaled $68.9 million as of March 31, leaving strong reserve coverage of over 200% of the nonaccrual loans. First Community announced on Thursday that it will reincorporate under the name of PacWest Bancorp. On May 14, the company's name will change and it will trade under a new stock symbol: PACW.
A Decent Quarter for First Niagara
First Niagara's returns on average assets and equity for the first quarter were 0.88% and 5.42%, down from 1.36% and 8.26% last quarter, and 0.95% and 5.47% in the first quarter of 2007. The decline in net income from last quarter mainly reflected a one-time gain on branch sales that was included in the fourth-quarter 2007 numbers. Operating income, excluding nonrecurring items fared better, with First Niagara reporting net income from operations of $20 million for the first quarter, compared to $19.3 million last quarter and $20 million in the first quarter of 2007. First Niagara's asset quality remained strong, with nonperforming assets comprising 0.38% of total assets, up slightly from 0.35% last quarter. Loan loss reserves remained strong, covering 222.16% of nonperforming loans. Like First Community, First Niagara carries a significant amount of goodwill and other intangible assets on its balance sheet. These items totaled $808 million as of March 31. With First Niagara's stock priced at 1.04 times book value, a significant writedown of goodwill appears unlikely.The bank is coming under scrutiny as part of a broader investigation into alleged laundering of drug-money by Latin American money-transfer companies.
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