First State restates earnings, boosts loan reserve
NEW MEXICO BUSINESS WEEKLY
First State Bancorporation, parent company of First Community Bank, said Monday that it is revising its first-quarter financial statements to add $10 million to its loan loss reserves.
That adjustment, the bank said, meant that its loss for the first quarter rose to $25.7 million, or $1.24 a share, from the originally reported $15.7 million.
The revision also means that First Community's ratio of total capital to risk-weighted assets has dropped to 7.53 percent, which puts the bank into the “undercapitalized” category for federal regulatory purposes.
Prior to Monday's announcement, First Community had $120 million in loan loss reserves. Now, it has $130 million, president and CEO Pat Dee said Monday. Of that, though, federal regulators are allowing only $25 million to be counted toward its total risk-based capital ratio, Dee said.
“The additional provision for loan losses was deemed necessary to appropriately recognize further declines in the value of real estate securing nonperforming loans based on recently received appraisals,” the bank said in a statement.
First State (NASDAQ: FSNM) has been under a written regulatory agreement with the Federal Reserve Bank since the summer of 2009.
First State said in April that the erosion of its capital and the deterioration of its loan portfolio made it unlikely that the bank would be able to maintain its “adequately capitalized” status with the FDIC without raising more capital, selling assets, merging with another firm, obtaining government assistance or some combination of those things.
Read more: First State stock slumps on loss, capital concerns - New Mexico Business Weekly
The company said then that it had submitted a recapitalization plan to federal regulators, but it had not yet been accepted “due to uncertainty of our ability to execute the plans.”
Since increasing the loan loss reserve put First Community into the undercapitalized category, the bank will have to submit a new capitalization plan to regulators, Dee said.
First Community is New Mexico's third-largest bank, with deposits of a little more than $2 billion. It ranks behind Wells Fargo Bank, with $5.26 billion, and Bank of America, with $4 billion, according to the FDIC.
First State shares closed at 54 cents on Monday.
Read more: First State restates earnings, boosts loan reserve - New Mexico Business Weekly:
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