Centennial Bank Holdings Inc. in Denver, which has bought four banks since 2004, has reported that it lost $138.2 million, or $2.68 per share, in the fourth quarter because of a goodwill impairment charge on its acquisitions.
The $2.4 billion-asset company earned $5.4 million, or 10 cents a share, the year earlier.
Centennial on Tuesday attributed the $142.2 million charge to a sharp decline in market value for the banking sector, weaker credit quality, and the softer real estate market, particularly in northern Colorado.
Paul Taylor, Centennial's chief financial officer, said in an interview that it had accumulated $400 million of goodwill and "the value of the company fell below what the goodwill would support." Centennial's stock trades on the Nasdaq America's Community Bankers Index, which lost 25% of its value during 2007.
Mr. Taylor said the charge does not affect regulatory capital, liquidity, or cash flow.
Several analysts said they were not surprised by the charge and view it as a positive for the company.
Brent Christ of Fox-Pitt Kelton Cochran Caronia Waller said in an interview that recognizing the goodwill impairment would shrink the gap between the company's book value and tangible book value, helping improve investors' perceptions. "I don't think people really believed the stated book value was accurate."
The company's book value declined to $7.96 per share, from $10.44 the previous quarter, he said. Tangible book value went up 7 cents, to $2.57.
"We think this removes another hurdle for the stock," Mr. Christ said, adding that the company also "did a good job" last quarter of addressing its problem loans.
Centennial's shares closed at $5.74 Wednesday, up 2.1%.
For the year, Centennial lost $138.1 million, or $2.60 a share, compared with net income of $24.4 million, or 42 cents a share, the year earlier.
