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Friday, Jan 27, 2023

First Community Bancorp Opts for Goodwill Write-Off

First Community Bancorp, parent of San Diego-based Pacific Western Bank, reported a net loss of $273 million for the first quarter, caused by a $275 million write-off of goodwill it had to take in response to the volatility in the banking industry, the bank said April 17.

First Community reported operating earnings of $2.3 million in the first quarter, compared to $28.5 million in like quarter of last year, and $17 million in the 2007 fourth quarter.

However, the company said its market capitalization, or the stock price multiplied by all the outstanding shares, as of Dec. 31 slipped below the total shareholders equity or its capital base for the same date.

When this occurs, federal securities regulations require that public companies determine whether and to what extent its goodwill, an intangible asset, is impaired.

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First Community said a hired consultant helped in the evaluation that concluded in writing down its goodwill by $275 million.

The charge has no effect on the company’s or the bank’s cash balances or liquidity, the bank said. And because the item is not considered in the calculation of regulatory capital, the bank remains well capitalized with a Tier 1 leverage capital ratio of 9.09 percent, compared to a minimum required 5 percent in leverage capital.

In line with practically all other lenders, First Community reported higher numbers of problem loans in the first quarter. The category increased by about $10 million to $32 million. Combined with real estate owned, or property taken back on foreclosures, total nonperforming assets at March 31 stood at $38 million, or 0.96 percent of total loans and other real estate owned. That ratio was up from 0.63 percent as of Dec. 31.

The bank set aside $26 million for possible future loan losses in the first quarter, and charged off $18.5 million in problem credits.

Pacific Western Bank, with 60 branch offices in San Diego, Orange, Los Angeles, Riverside and San Bernardino counties, had total assets of $4.9 billion as of March 31, down from $5.2 billion at the end of 2007, and about $5.5 billion at the end of March 2007. It is the second largest locally based bank behind California Bank & Trust which has more than $10 billion in assets.

The bank reported total loans of $4 billion at March 31, down $46.5 million from the end of 2007, mainly due to the sale of a $34 million portfolio of problem loans. The bank said it sustained a loss of $16 million on that sale.

Traded on Nasdaq under FCBP, shares were down $1.62 in midday trading to $24.38 April 17, and have ranged from $23.90 to $62.56 over the past 52 weeks.

, Mike Allen


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