Devaluation of collateral has finally caught up to the Pinellas Park-based bank.
Realizing that 2010 will inevitably become the company's third consecutive down year, executives at First Community Bank Corporation of America took actions that led to a $9.3 million loss in the second quarter of 2010.
The company is considered well capitalized, with a 7.38% ratio of equity to total assets, and despite $28 million in non-performing loans managed a 2.90% net interest margin for the quarter. But falling real estate prices decreased the values of collateral properties on First Community's books.
Write-downs on and specific reserves set aside for real estate loans led to a combined $12.8 million decrease in earnings, a release from the bank said. Those results, combined with an accounting maneuver that makes the most of current losses(1), gave First Community its $9.3 million loss for the recently concluded quarter.
This latest performance by First Community gives the Pinellas Park-based bank an $11.6 million year-to-date loss.
(1) Anticipating that it would not be profitable next quarter, First Community established a $6.8 million allowance against its deferred tax asset to boost future earnings. Deferred tax assets — which reduce future taxes owed for companies that recently posted losses (a company that lost $1 million last year and earned $1 million this year owes zero taxes) — may only be used in a quarter in which a company has turned a profit.