Defaults weigh on bank earnings despite improvements

Two big Nevada bank operators this week reported improved first quarter earnings, but said loan defaults remain high because of the recession.

Western Alliance Bancorporation, owner of Bank of Nevada, First Independent Bank of Nevada and banks in Arizona and California, said Thursday it earned $384,000 in the quarter, an improvement from 2009's first quarter when the company lost $86.4 million. The company swung to a profit in the 2010 quarter thanks to gains of $8.2 million from securities sales.

After payment of preferred dividends, the company lost 3 cents per share in the quarter vs. a loss of $2.33 in the year-ago quarter. A key financial indicator, net interest income, improved from $50.7 million in the first quarter of 2009 to a record $54.7 million in the 2010 quarter.

The bank holding company reported record growth in deposits of $468 million during the quarter to $5.19 billion and year-over-year growth of $1.13 billion.

With customers saving more and borrowing less, Western Alliance said loans outstanding decreased $21 million to $4.06 billion.

Western Alliance said that by one measure, the provision for credit losses, its loan portfolio improved sequentially during the quarter.

The provision was $28.7 million for the first quarter of 2010 compared to $40.8 million for the fourth quarter of 2009.

But looking at nonaccrual loans and repossessed assets, the portfolio's quality declined slightly. Nonaccrual loans and repossessed assets totaled $254 million or 4.17 percent of total assets at March 31, compared with $237 million or 4.12 percent of total assets at Dec. 31 and $115 million or 2.19 percent of total assets at March 31, 2009.

"I am delighted by our extraordinary growth in low-cost, stable deposits during the quarter and continued improvement in our key performance areas," Robert Sarver, chairman and CEO, said in a statement.

"Although non-recurring revenue augmented our stronger fundamentals to achieve positive income during the quarter, we are well-positioned to continue to improve our performance and report core operating earnings during the year," Sarver said.

Separately, Zions Bancorporation, owner of Nevada State Bank, on Monday said it lost $86.5 million or 57 cents per share after the payment of preferred dividends, an improvement from the 2009 first quarter loss of $852.3 million or $7.47 per share.

Salt Lake City-based Zions has banks in 10 western states.

Zions' provision for loan losses was $265.6 million, down from $390.7 million in the fourth quarter of 2009 and $297.6 million in the first quarter of 2009.

Still, nonperforming lending-related assets totaled $2.5 billion at the end of the quarter compared to $2.4 billion in the fourth quarter. And, like other banks, Zions has seen a reduction in demand for new loans because of the recession.

Despite originating and renewing approximately $1.4 billion of credit during the first quarter, loan balances declined 2.9 percent from the fourth quarter.

"We are encouraged by recent credit trends, particularly the significant decline in gross loan charge-offs during the quarter, and by a reduction in loss severity across the major loan categories," CEO Harris Simmons said in a statement. "We're also pleased with the continued strengthening of the composition of our core deposit base and the strong net interest margin. Finally, we are pleased that both our allowance for credit losses and our capital ratios continued to strengthen this quarter."

Other big Nevada bank operators reported first quarter profits, with the banks generally saying credit conditions are improving as the recession eases nationwide.

--Wells Fargo & Co. posted a fifth straight quarterly profit. First-quarter net income fell 16 percent to $2.55 billion, or 45 cents a share, compared with $3.05 billion, or 56 cents a share, in the same period a year earlier.

--Bank of America Corp. reported a quarterly profit of $3.18 billion thanks to strong trading revenue from its Merrill Lynch & Co. subsidiary. Net income amounted to 28 cents a share, compared with $4.25 billion, or 44 cents, in the same period a year earlier.

--U.S. Bancorp posted a 26 percent increase in first-quarter profit. Net income advanced to $669 million, or 34 cents a share, from $529 million, or 24 cents, in the same period a year earlier.

--Citigroup Inc. said profit more than doubled. First-quarter net income of $4.43 billion followed a loss of $7.58 billion in the fourth quarter and a profit of $1.59 billion in the first three months of 2009. Adjusted per-share earnings were 14 cents.

Bloomberg News contributed to this report.