Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, May 11, 1990 TAG: 9005110134
SECTION: BUSINESS PAGE: C-1 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
DATELINE: LENGTH: Medium
The transfer of income funds to capital followed an examination by the Comptroller of the Currency. Dominion is the first major bank in Virginia to undergo tighter scrutiny of its commercial real-estate portfolio.
The bank said the transfer to the loan-loss reserve also reflects a decline in real estate values and general weakening of real estate markets since year end.
The Roanoke-based bank holding company said it lost $13.9 million, or 38 cents a share, for the first quarter because of the higher loan-loss provision. That compares with net income of $23.4 million, 60 cents a share, for the first three months of 1989.
The bank's loan-loss provision was $13 million at the end of 1989. Had the $13 million remained in effect, the bank said, it would have had net income of about $23.4 million, or 61 cents a share.
Henry J. Coffey Jr., who follows the industry for J.C. Bradford & Co. in Nashville, said the 61 cents was in line with analysts' estimates.
Every bank undergoing the stricter examination has produced equally tough numbers, Coffey said.
The results are hard to live with short term, he said, but the ongoing situation is encouraging. He said the banking system will be improved overall.
Dominion has lots of capital, a good record over the past 10 years, very high basic earning power and excellent coverage for continued payment of dividends, Coffey said. Directors previously voted to continue the 22-cent dividend for the first quarter.
Chairman Warner Dalhouse said the first-quarter adjustments don't imply an increase in actual losses in the future. He said the more conservative regulatory environment is expected to enhance Dominion's fundamental strengths.
If loans should go bad, he said, Dominion is well situated to handle the situation. If not, he said, the bank will be in a strong position.
The bank said about 53 percent of loans added to the nonperforming category are either current or past due less than 90 days. The higher reserve provides 88 percent coverage of nonperforming loans.
Banks have always counted as "performing" those loans on which principal and interest payments are current. Under new standards, such loans may be declared nonperforming if the underlying cash flow is deemed insufficient - because of a vacancy rate above projections, for instance. The standards are designed to cover loans that could fall into the troubled category in the next few years.
Dalhouse said that less than $1 million in loans were charged off as worthless during the examination.
Anthony Davis, banking analyst for Wheat First Securities in Richmond, said he was surprised by the magnitude of the reserve increase. While all banks may have been less than vigilant in recognizing nonperforming loans, he said, the new regulatory world may be unrealistic.
He said regulators may be creating or worsening economic problems by making banks gun-shy about lending. He said real estate developers may find it difficult to borrow.
The bank said consolidated nonperforming assets were up $130 million at year end to $208 million, resulting in a ratio to total assets of 2.05 percent.
At the end of the quarter, nonperforming assets consisted of $156 million of nonaccruing loans, of which $72 million was current or fewer than 90 days past due, $46 million of foreclosed properties and $6 million of renegotiated loans.
The quarterly report showed company's assets at $10.2 billion, a 10.7 percent increase over the same period last year. Loans rose 8.2 percent to $7 billion and total deposits were $7.7 billion, up 8.5 percent.
Dominion's primary capital ratio of 8.1 percent exceeds regulatory guidelines.
by CNB