Pacific Western Now Reporting a Loss
SAN FRANCISCO - Pacific Western Bancshares announced Friday that it had revised its second-quarter earnings to show a loss of $2.2 million instead of a $430,000 profit.
Pacific Western, which has $1.2 billion in assets, said the revision resulted from an overhaul of its credit operations following the mid-June appointment of Frank Pierro as credit chief.
After conducting an intensive review of its loan portfolio, the company said, it decided to raise its second-quarter provision to $7.8 million from the originally reported $2.8 million.
That raised the loan-loss reserve to $17.6 million, or 50% of nonperforming loans, from the earlier reported level of $12.6 million, or 36% of nonperforming loans.
There was no revision in total nonperforming assets, which remained at $54.5 million.
Examiners from the San Francisco Federal Reserve Bank reviewed Pacific Western's real estate loan portfolio in the second quarter. But the added provision had nothing to do with the audit, Phillip R. Boyce, the company's chairman and chief executive, said in an interview.
Internal Controls Faulted
Although San Francisco Bay Area commercial real estate is in a slump, analysts said Pacific Western's earnings revision was more a reflection of weak internal controls rather than general market conditions.
Earlier this year, the company suffered million dollar losses due to employee fraud and a customer check-kiting scheme.
The earnings revision is "another example of lax policies and procedures," said Campbell K. Chaney, analyst with Sutro & Co., San Francisco.