Magazine article American Banker

Dominion Bankshares Suspends Dividend

Magazine article American Banker

Dominion Bankshares Suspends Dividend

Article excerpt

Dominion Bankshares, Roanoke, Va., suspended its quarterly dividend Monday to preserve capital after reporting a $27.8 million loss for the first quarter.

The dividend cut at Dominion contrasts with the industry trend, where dividend suspensions or reductions have slowed, according to John Works, an analyst with Keefe, Bruyette & Woods Inc.

In 1991, a record 30 banking companies out of 147 followed by Keefe eliminated or reduced their dividends, compared with 27 in 1990.

Only a handful of banks have reduced their dividends this year, including First Chicago Corp., which cut its payout on common stock in January, and CommerceBancorp, Newport Beach, Calif., which eliminated its dividend, Mr. Works said.

Somber News for Investors

Suspension of the 44 cents a share annual dividend by Dominion provides a reminder that even adequately capitalized banks can still burn investors with unexpected bad news. Dominion's stock price fell $2.50, or 17%, after the announcement, closing the day at $12.125.

Despite the first-quarter loss, Dominion's leverage capital ratio stands at 5.18% and its ratio of total capital to risk-adjusted assets is 9.40%, both above regulatory requirements.

"Dominion's capital levels are by no means terribly weak, but they're below the norm for regional banks," said Richard Stillinger, southeastern bank analyst with Keefe.

Coping with Real Estate

James Adams, Dominion's chief financial officer, said Dominion suspended its $16 million total annual dividend payout to increase its flexibility in dealing with the sharp drop in the value of its real estate assets in the Washington region. …

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