Magazine article American Banker

Loan-Loss Provision Expected to Cut Earnings at First City

Magazine article American Banker

Loan-Loss Provision Expected to Cut Earnings at First City

Article excerpt

NEW YORK -- An unexpectedly large third-quarter loan-loss provision is expected to reduce earnings of First City Bancorporation of Texas, Houston, to below second-quarter levels, the company announced Tuesday.

The $16 billion-asset holding company said in a statement that it would earn about $15.9 million in the third quarter, or about 33 cents a share. Final results for the quarter will be reported next week.

The third-quarter figure is more than triple the $5.2 million, or 10 cents a share, earned during the third quarter of 1983. Bit it is below the $25.6 million, or 65 cents a share, earned in the second quarter of this year.

Analysts said the earnings were below Wall Street estimates but reflected the tough stand being taken on nonperforming credits by both banks and examining regulators. First City expects its third-quarter loan-loss provision to be about $54 million, up from $32.6 million in the second quarter but below the $61 million provision taken in the third quarter of 1983.

According to the statement the increase reflects "management's regular quarterly assessment of its loan portfolio in light of the continued weaknesses in the regional economu, especially in the energy sector." The statement added that "substantially all of the provision reflects increased reserves for credits that management identified as potential problems in previous quarterly reviews."

Texas bank analysts said that some of the provisions may have been prompted by regular and spot exminations by regulators, who are expected to take a tough, conservative stand on chargeoofs in light of recent problems at First Chicago Corp. The company said that the "views of bank regulatory agencies as expressed in connection with their recent examinations were also fully considered."

The company also said that reserve levels were determined in light of the creditworthiness of borrowers, the current value of collateral supporting loans and their chances of being collected in light of existing and expected economic conditions. …

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