Fannie, Freddie seizure may affect Western Alliance results


Western Alliance Bancorporation, the Las Vegas-based holding company for Bank of Nevada, on Tuesday said it expects to take a noncash charge of $15 million to $20 million for preferred stock and preferred debt holdings, including some at Freddie Mac, which the government seized Sunday.

Preferred shares of Freddie Mac and Fannie Mae, two residential mortgage lenders, lost most of their market value as a result of the government takeover.

The local banking company made the announcement the day after Wells Fargo & Co. disclosed it holds $480 million in preferred stock in Fannie Mae and Freddie Mac.

The Nevada Financial Institutions Division is conducting a survey of state-chartered banks with headquarters in Nevada to determine which ones held Freddie Mac and Fannie Mae preferred stocks and to see how the preferred stock holdings may affect bank capital.

The survey is incomplete, said Commissioner George Burns, but the 65 percent reporting so far have no preferred stock holdings in Fannie Mae or Freddie Mac.

Western Alliance, however, said it owned $3.5 million of Freddie Mac and $5 million of collateralized debt obligations, which consisted of mostly financial institution preferred debt.

The dividends and debt service on these investments ceased Monday.

"Everything else is still performing and paying as agreed," Western Alliance Chief Financial Officer Dale Gibbons said.

Western Alliance also holds other financial institution preferred stock and trust-preferred debt, but those losses have already been reported for the second quarter.

Trust-preferred securities are hybrid securities with attributes of both subordinated debt and preferred stock.

Despite the losses, the banking company said it continues to be well capitalized under federal rules.

Western Alliance expects to earn 10 cents to 14 cents in the third quarter, before the charge-offs -- up from 8 cents a share in the second quarter. Analysts polled by Bloomberg News forecast earnings of 9 cents per share.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.

 

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