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Loan woes, FDIC costs a double whammy for banks [Pittsburgh Post-Gazette]
[October 25, 2009]

Loan woes, FDIC costs a double whammy for banks [Pittsburgh Post-Gazette]

(Pittsburgh Post-Gazette (PA) Via Acquire Media NewsEdge) Oct. 25--Earnings reports last week from a handful of small and midsize Western Pennsylvania bank provide a glimpse into the impact two industrywide phenomena are having on their bottom lines: the troubled credit market and efforts to bulk up the federally sponsored deposit insurance program.

Johnstown-based AmeriServ Financial [Ticker: ASRV] posted a third-quarter loss of $2.8 million, or 15 cents per share, reflecting a $3.5 million reserve established for a $10 million restaurant loan that was restructured. AmeriServ said it has reduced payments on the loan for six months to give the borrower time to improve its cash flow. The bank's provision for loan losses totaled $11.4 million for the first nine months of the year vs. $2.3 million for the year-ago period.

"The continued recessionary economy is now clearly impacting our commercial borrowers based in Western Pennsylvania," President and CEO Allan R. Dennison said.

First Commonwealth Financial [FCF] said its nonperforming loans increased $51.9 million during the quarter to $133.8 million, or 2.9 percent of total loans. The Indiana bank reported a third-quarter loss of $3 million, or 4 cents per share.

New additions to First Commonwealth's roster of nonperforming loans include a $38.8 million loan for a Florida condominium development, a $10.8 loan for a landfill in Western Pennsylvania and a $4.9 million loan to a Texas semiconductor manufacturer.

Florida's woes also affected S&T Bancorp [STBA], which nevertheless managed to post a third-quarter profit of $7.7 million, or 28 cents per share. Nonperforming loans totaled $86.5 million, or 2.5 percent of the loans on the books of the Indiana, Pa.-based bank. The list of bad loans includes $16.9 million for three commercial real estate projects in New York and Connecticut and $11.5 million for a mixed-use redevelopment project in Western Pennsylvania.

Third-quarter profits fell 80 percent at FNB Corp. [FNB]. The Hermitage bank's net income of $4.8 million, or 4 cents per share, reflected a $16.5 million charge for loan losses, more than double year-ago levels.

Provisions for loan losses over the first nine months of the year declined 18 percent at ESB Financial [ESBF], which reported third-quarter profits of $3.5 million, or 29 cents per share. The Ellwood City banker reported a 17 percent increase in net income for the first nine months of the year and said results would have been even rosier were it not for the $891,000 special assessment levied by the Federal Deposit Insurance Corp.

The federal agency approved the charge in May to bolster the insurance fund that protects depositors at failed banks. FDIC recommended additional protection last month, proposing to raise $45 billion by requiring banks to prepay their quarterly assessments for the fourth quarter of 2009 through 2012. The proposal is circulating for comment and has not been approved yet, FDIC spokesman Andrew Gray said.

About 100 FDIC-insured banks have failed this year.

First Commonwealth said its FDIC insurance costs rose $8 million in the first nine months of the year, including $2.9 million for the special assessment. S&T said its FDIC expense totaled $6.9 million in the first nine months vs. $280,000 in the same period a year ago, while AmeriServ recorded a $962,000 increase in FDIC-related expenses for the first nine months of the year.

A new report from the National Association of Corporate Directors indicates the average director spends about 222 hours on the job annually, about the same time commitment they reported for the previous year. That translates into a little more than a month of eight-hour work days.

Directors told the Washington-based professional group they spend about a third of their time reviewing reports and other materials and another third attending meetings.

The report, published this month, is based on a survey of directors who serve on the boards of public and private companies and nonprofit organizations. Respondents said boards they served on held an average of 6.1 meetings, virtually the same as reported in last year's survey.

A random sample of two dozen Western Pennsylvania public companies indicates they held an average of 8.9 meetings in their most recent fiscal year, nearly three more meetings than NACD found. The number of board meetings ranged from four at II-VI and Ampco-Pittsburgh to 15 at PNC Financial Services Group, where the board's 2008 agenda included the acquisition of beleaguered Cleveland banker National City. Among larger companies, H.J. Heinz's board met eight times and directors at American Eagle Outfitters, PPG Industries and U.S. Steel met nine times.

The NACD study also revealed that a majority of the directors who responded said their companies did not have policies restricting the number of boards the CEO can serve on.

That said, respondents provided their own ideas of how many boards directors can serve on and still be effective: 1.4 for CEOs; 2.1 for other executives holding down a full-time job; 3.7 for retired CEOs and 3.8 for other retired executives.

Len Boselovic can be reached at [email protected] or 412-263-1941.

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