Capital Corp. of the West in Merced, Calif., reported a surprise first-quarter profit as its loss provision for impaired loans to residential developers came in lower than expected.
The $2.1 billion-asset company said late Monday that it earned $2.3 million in the quarter, or 21 cents per share, and that its provision for loan losses was $1.2 million.
Though the profit was down 41% from the year earlier, analysts had expected the company to take a much higher provision and had predicted it would lose about 26 cents a share.
In the fourth quarter, Capital Corp. lost $14.2 million largely because of a $26 million loan-loss provision.
Capital Corp. said it swung to a profit in the first quarter because it received additional collateral from its borrowers, which enabled it to reverse $10.9 million of loss reserves taken in December. In the first quarter, Capital Corp. had $77.2 million of impaired loans, but it said about one-third of those were either still performing or were loans for which additional collateral was posted.
Joe Morford, an analyst at Royal Bank of Canada's RBC Capital Markets in San Francisco, said he was surprised that Capital Corp. reported no loss for the quarter. However, nonperforming credits still made up 5.6% of total loans, he said, so it is likely the company will take higher provisions in the next several quarters.
