Big banks aren’t 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 Credit’s 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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