Capital Corp of the West in Merced, Calif., said it has increased its fourth-quarter loan provision because a borrower is having troubles related to Asia's.
The bank had announced Jan. 8 that it was taking a $900,00 provision for the fourth quarter. But last week the bank said it had raised the provision by $1.35 million to cover a loan loss of that amount.
Tom Hawker, chief executive officer at $500 million-asset Capital Corp, said the customer, a manufacturer, sells its goods to other U.S. companies that sell them to large corporations in the Far East.
The company fell behind on the loan because regional demand for U.S. products has diminished, Mr. Hawker said.
Since boosting its provision in January, Capital Corp. has recovered $200,000 of the loan involved, Mr. Hawker said. The banking company is reviewing its entire loan portfolio to see whether similar circumstances exist, he added.
"As a community bank, you think you are immune from the Asian crisis because you do not make overseas loans," Mr. Hawker said. "Then something like this pops up and slams you."
Despite the problem loan, Capital Corp's earnings rose last year thanks to the acquisition of three Bank of America branches in late 1997 and to fee income.
Capital Corp reported 1998 earnings of $2.7 million, or 60 cents per share, compared with 1997 earnings of $403,000, or 12 cents per share.