Citing a surge in nonperforming loans and recently discovered accounting errors, First Banks Inc. of St. Louis said that it expects to report a $5.5 million first-quarter loss and that its will restate its earnings for the past five years.
The privately held First Banks said Wednesday that on May 13 it discovered certain mortgage transactions were improperly recorded in the consolidated financial statements, forcing it to revise its earnings for the past five years. The errors resulted in its overstating earnings by $6.2 million in 2007, $3.5 million in 2006, and $1.4 million in 2005, it said.
First Banks also announced it has established a workout unit called FB Holdings LLC to deal with certain nonperforming loans. First Capital America Inc., which is owned by the same family that owns First Banks, has committed to invest up to $40.0 million in cash in the workout firm.
First Banks, which has assets of $10.5 billion, said in its annual report for 2007 that it had $202.2 million of nonperforming loans, more than four times its 2006 amount. Of the total troubled credits, $6.6 million, or 3.25%, were attributed to the subprime portfolio; First Banks originated the high-risk, high-rate loans and then sold them on the secondary market. Nearly half of its nonperforming loans at yearend were in its Northern California real estate portfolio and $45.1 million were from Coast Financial Holdings Inc., a Bradenton, Fla., company it acquired for $22 million in December.
