Big banks arent the only ones being dogged by bad loans.
Late Thursday two community bank companies BSB Bancorp in Binghamton, N.Y., and Imperial Credit Industries in Torrance, Calif. announced that they were boosting loan-loss provisions and taking hefty losses in the fourth quarter because of troubled loans. Imperial Credit, parent of $2 billion-asset Southern Pacific Bank, also revealed that it has been ordered by the Federal Deposit Insurance Corp. to stop making the types of high-risk loans that has led to repeated chargeoffs in recent years.
BSB, with $2.3 billion of assets, estimates that its losses will be $8.1 million for the fourth quarter and its earnings for the year will be just $2.3 million. In 1999, BSB reported net income of $18.2 million.
It would be the second consecutive quarter in which BSB has lost money. In the quarter that ended Sept. 30, the company reported a loss of $1.7 million, causing NBT Bancorp of Norwich, N.Y., to call off its proposed acquisition of BSB.
BSB said it would charge off $8.8 million and boost loan-loss provisions for the year by nearly 80%, to $59.5 million. At yearend 1999, BSB had loan-loss provisions of $41.8 million.
Meanwhile, Imperial Credit announced Thursday that it plans to record up to $42 million in loan-loss provisions for its fourth quarter because of anticipated chargeoffs, compared to $7.2 million in 1999. As a result, the company expects to post a substantial loss for the quarter.
Imperial Credit was also ordered by the FDIC to strengthen its workout strategies, to develop a business plan based on less-risky lending practices, and to increase its equity capital by $39 million by Dec. 31, 2001. The California Department of Financial Institutions is expected to issue a similar order, the company said.
Southern Pacific, Imperial Credits bank subsidiary, uses certificates of deposit and money market instruments to fund high-risk loans, mainly to distressed companies, using the borrowers accounts receivable, inventory, or equipment as collateral.
Imperial Credit also said it has hired investment bankers Friedman Billings Ramsey & Co. of Arlington, Va., to evaluate capital-raising alternatives for the company.
Imperial Credit used to be a division of Imperial Bank of Inglewood, Calif., but the $7.1 billion-asset bank in 1992 divested most of its stake in Imperial Credit after the subsidiary posted continued losses.
Imperial Bank sold its remaining 24.3% stake in Imperial Credit in mid-1999 after the Torrance company posted losses of $73.6 million for 1998.
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